Arena Pharmaceuticals said it will eliminate approximately 80 jobs—35% of its U.S. workforce—by year’s end, as part of cost-cutting efforts tied to a refocusing of its R&D strategy following disappointing sales for its sole marketed drug.
The cost-cutting follows lower-than-expected sales for its obesity drug BELVIQ® (lorcaserin HCl), which recorded $10.9 million in net product sales during the first half of this year. That’s up 70% from $6.4 million for January-June 2014, but still short of once-lofty expectations: Credit Suisse analyst Lee Kalowski in 2013 cut his net revenue forecast for BELVIQ from $459 million but still projected net sales for the drug would reach $325 million this year.
Earlier this month, Arena said its president and CEO Jack Lief, a co-founder of the company, had retired from the company and its board “at the request of the board of directors.” Lief’s announced retirement came four months after Robert E. Hoffman, svp and CEO, left the company after nearly 18 years “to pursue another opportunity in the biotechnology industry.”
In announcing the layoffs and cost-cutting yesterday, Arena estimated it would incur approximately $3.3 million in restructuring charges related to the layoffs, namely one-time employee termination costs that include severance and other benefits.
The company also estimated approximately $11 million in annual personnel costs as a result of the U.S. job cuts, set for completion by December 31, 2015.
Arena added that it plans to carry out unspecified reductions at its commercial manufacturing facility in Zofingen, Switzerland, among additional cost-cutting measures.
The company also said it will concentrate on what it considers key R&D strengths. Those efforts include BELVIQ, for which it will support partner Eisai in pursuing endpoints of the ongoing cardiovascular outcomes trial (CVOT) or CAMELLIA study—such as MACE, diabetes conversion, and MACE plus. Arena will also seek regulatory approval for a once-daily formulation of BELVIQ, called BELVIQ XR®.
“We believe our clinical-stage pipeline, including the MACE plus portion of the CAMELLIA study, offer tremendous promise, and we are committed to generating clinical data supporting meaningful differentiation of our compounds from currently available therapies,” Arena interim CEO Harry F. Hixson, Jr., said in a statement.
However, Arena said it “does not intend to currently advance” certain lifecycle management programs for BELVIQ, including a study of the drug for smoking cessation and a combination study with phentermine for weight management. The company cited feedback from the FDA, which told Arena that a combination study would require a full development program, including a factorial design Phase II study and two, one-year Phase III studies.
As for smoking cessation, Arena said “market-specific challenges” might limit the potential return on the investment required to advance a development program for that indication.
However, Arena committed itself to several other R&D priorities:
- APD334—Continue to advance an ongoing Phase II clinical trial for ulcerative colitis, and potentially explore additional indications beyond inflammatory bowel disease through small pilot studies.
- Ralinepag (formerly APD811)—Continue to advance an ongoing Phase II trial for pulmonary arterial hypertension (PAH), and potentially explore enhanced efficacy with other classes of PAH agents.
- APD371—Advance a Phase I multiple-ascending dose clinical trial.
Beyond R&D, Arena said, it will maintain its core research function to discover and advance drug candidates; assess its strategic collaboration opportunities for unspecified clinical- and earlier-stage programs; and meet its manufacturing obligations to collaborators and others, while reducing commercial manufacturing overhead to achieve potential savings.
“This initiative supports our strong desire to create a more streamlined and efficient organization focused on key priorities designed to add both near- and long-term value to the organization,” Hixson added.
Arena said it expected to discuss its strategic refocusing and cost cutting during its upcoming quarterly conference call with analysts. The date of that call had not been posted on the company’s website at deadline, though according to the website of NASDAQ, where the company's stock is traded, an earnings announcement is expected on Monday.