arna-10q_20190930.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to

Commission File Number: 000-31161

 

ARENA PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

23-2908305

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

6154 Nancy Ridge Drive, San Diego, CA

 

92121

(Address of principal executive offices)

 

(Zip Code)

 

858.453.7200

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

 

 

Common Stock, par value $0.0001 per share

 

ARNA

 

The Nasdaq Global Select Market

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes      No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

 

  

Small reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes      No


 

The number of shares of common stock outstanding as of the close of business on November 1, 2019:

 

Class

 

Number of Shares Outstanding

Common Stock, $0.0001 par value

 

50,107,145

 

 

 

 


 

ARENA PHARMACEUTICALS, INC.

INDEX

 

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

1

 

Condensed Consolidated Balance Sheets - As of September 30, 2019, and December 31, 2018

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss - Three and Nine Months Ended September 30, 2019, and 2018

2

 

Condensed Consolidated Statements of Stockholders’ Equity - Three and Nine Months Ended September 30, 2019, and 2018

4

 

Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2019, and 2018

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

Item 4.

Controls and Procedures

20

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

21

Item 1A.

Risk Factors

22

Item 6.

Exhibits

44

Signatures

45

 

 

TRADEMARKS AND CERTAIN TERMS

Arena Pharmaceuticals ® and Arena ® are registered service marks of Arena. Any other brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

In this Quarterly Report on Form 10-Q, “Arena Pharmaceuticals,” “Arena,” “we,” “us” and “our” refer to Arena Pharmaceuticals, Inc., and our wholly owned subsidiaries on a consolidated basis, unless the context otherwise provides. “APD” is an abbreviation for Arena Pharmaceuticals Development.

 

 

1


 

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

ARENA PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

170,884

 

 

$

161,037

 

Short-term investments, available-for-sale

 

 

612,871

 

 

 

284,594

 

Accounts receivable

 

 

1,696

 

 

 

5,086

 

Prepaid expenses and other current assets

 

 

20,930

 

 

 

10,008

 

Total current assets

 

 

806,381

 

 

 

460,725

 

Investments, available-for-sale

 

 

389,980

 

 

 

82,412

 

Land, property and equipment, net

 

 

23,698

 

 

 

23,114

 

Deferred tax assets

 

 

 

 

 

110,333

 

Other non-current assets

 

 

21,989

 

 

 

10,319

 

Total assets

 

$

1,242,048

 

 

$

686,903

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and other accrued liabilities

 

$

17,280

 

 

$

16,181

 

Accrued clinical and preclinical study fees

 

 

15,860

 

 

 

10,454

 

Current portion of lease financing obligations

 

 

3,676

 

 

 

3,283

 

Total current liabilities

 

 

36,816

 

 

 

29,918

 

Other long-term liabilities

 

 

12,409

 

 

 

1,301

 

Lease financing obligations, less current portion

 

 

46,617

 

 

 

49,426

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock

 

 

5

 

 

 

5

 

Additional paid-in capital

 

 

2,159,445

 

 

 

2,106,960

 

Accumulated other comprehensive income (loss)

 

 

1,442

 

 

 

(155

)

Accumulated deficit

 

 

(1,014,686

)

 

 

(1,500,552

)

Total stockholders' equity

 

 

1,146,206

 

 

 

606,258

 

Total liabilities and stockholders' equity

 

$

1,242,048

 

 

$

686,903

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

1


 

ARENA PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United Therapeutics revenue

 

$

 

 

$

 

 

$

800,000

 

 

$

 

Royalty revenue

 

 

811

 

 

 

3,210

 

 

 

2,725

 

 

 

4,798

 

Collaboration and other revenue

 

 

539

 

 

 

363

 

 

 

704

 

 

 

4,524

 

Total revenues

 

 

1,350

 

 

 

3,573

 

 

 

803,429

 

 

 

9,322

 

Operating Costs and Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

60,257

 

 

 

28,811

 

 

 

156,864

 

 

 

77,139

 

General and administrative

 

 

20,428

 

 

 

10,766

 

 

 

55,373

 

 

 

32,322

 

Transaction costs

 

 

 

 

 

 

 

 

14,573

 

 

 

 

Total operating costs and expenses

 

 

80,685

 

 

 

39,577

 

 

 

226,810

 

 

 

109,461

 

Income (loss) from operations

 

 

(79,335

)

 

 

(36,004

)

 

 

576,619

 

 

 

(100,139

)

Interest and Other Income (Expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

6,889

 

 

 

2,524

 

 

 

20,971

 

 

 

5,800

 

Interest expense

 

 

(1,203

)

 

 

(1,423

)

 

 

(3,666

)

 

 

(4,344

)

Other income

 

 

784

 

 

 

589

 

 

 

2,275

 

 

 

1,403

 

Total interest and other income (expense), net

 

 

6,470

 

 

 

1,690

 

 

 

19,580

 

 

 

2,859

 

Income (loss) from continuing operations before income taxes

 

 

(72,865

)

 

 

(34,314

)

 

 

596,199

 

 

 

(97,280

)

Income tax provision

 

 

 

 

 

 

 

 

(110,333

)

 

 

 

Income (loss) from continuing operations

 

 

(72,865

)

 

 

(34,314

)

 

 

485,866

 

 

 

(97,280

)

Loss from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

(830

)

Net income (loss)

 

$

(72,865

)

 

$

(34,314

)

 

$

485,866

 

 

$

(98,110

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share, basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(1.46

)

 

$

(0.70

)

 

$

9.78

 

 

$

(2.10

)

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

(0.02

)

 

 

$

(1.46

)

 

$

(0.70

)

 

$

9.78

 

 

$

(2.12

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share, diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(1.46

)

 

$

(0.70

)

 

$

9.39

 

 

$

(2.10

)

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

(0.02

)

 

 

$

(1.46

)

 

$

(0.70

)

 

$

9.39

 

 

$

(2.12

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in calculating net income (loss) per share, basic:

 

 

49,864

 

 

 

49,368

 

 

 

49,667

 

 

 

46,243

 

Shares used in calculating net income (loss) per share, diluted:

 

 

49,864

 

 

 

49,368

 

 

 

51,763

 

 

 

46,243

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(72,865

)

 

$

(34,314

)

 

$

485,866

 

 

$

(98,110

)

Foreign currency translation gain (loss)

 

 

(33

)

 

 

65

 

 

 

(45

)

 

 

32

 

Unrealized gain on available-for-sale investments

 

 

168

 

 

 

93

 

 

 

1,642

 

 

 

62

 

Comprehensive income (loss)

 

$

(72,730

)

 

$

(34,156

)

 

$

487,463

 

 

$

(98,016

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

2


 

ARENA PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

 

49,422,991

 

 

$

5

 

 

$

2,106,960

 

 

$

(155

)

 

$

(1,500,552

)

 

$

606,258

 

Issuance of common stock upon exercise of options

 

 

125,655

 

 

 

 

 

 

 

3,364

 

 

 

 

 

 

 

 

 

3,364

 

Share-based compensation expense

 

 

 

 

 

 

 

 

13,024

 

 

 

 

 

 

 

 

 

13,024

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

676

 

 

 

 

 

 

676

 

Translation loss

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

620,134

 

 

 

620,134

 

Balance at March 31, 2019

 

 

49,548,646

 

 

$

5

 

 

$

2,123,348

 

 

$

502

 

 

$

(880,418

)

 

$

1,243,437

 

Issuance of common stock upon exercise of options

 

 

229,565

 

 

 

 

 

 

4,722

 

 

 

 

 

 

 

 

 

4,722

 

Issuance of common stock upon vesting of restricted

     stock unit awards

 

 

24,362

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

13,428

 

 

 

 

 

 

 

 

 

13,428

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

798

 

 

 

 

 

 

798

 

Translation gain

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

7

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(61,403

)

 

 

(61,403

)

Balance at June 30, 2019

 

 

49,802,573

 

 

$

5

 

 

$

2,141,498

 

 

$

1,307

 

 

$

(941,821

)

 

$

1,200,989

 

Issuance of common stock upon exercise of options

 

 

181,908

 

 

 

 

 

 

4,602

 

 

 

 

 

 

 

 

 

4,602

 

Share-based compensation expense

 

 

 

 

 

 

 

 

13,345

 

 

 

 

 

 

 

 

 

13,345

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

168

 

 

 

 

 

 

168

 

Translation loss

 

 

 

 

 

 

 

 

 

 

 

(33

)

 

 

 

 

 

(33

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(72,865

)

 

 

(72,865

)

Balance at September 30, 2019

 

 

49,984,481

 

 

$

5

 

 

$

2,159,445

 

 

$

1,442

 

 

$

(1,014,686

)

 

$

1,146,206

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


 

ARENA PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

 

39,280,687

 

 

$

4

 

 

$

1,698,543

 

 

$

(1,216

)

 

$

(1,490,187

)

 

$

207,144

 

Adoption of ASC Topic 606

 

 

 

 

 

 

 

 

 

 

 

1,102

 

 

 

19,034

 

 

 

20,136

 

Issuance of common stock to underwriters

 

 

9,775,000

 

 

 

1

 

 

 

383,147

 

 

 

 

 

 

 

 

 

383,148

 

Issuance of common stock upon exercise of options

 

 

112,550

 

 

 

 

 

 

1,919

 

 

 

 

 

 

 

 

 

1,919

 

Issuance of common stock upon vesting of restricted

     stock unit awards

 

 

28,448

 

 

 

 

 

 

(166

)

 

 

 

 

 

 

 

 

(166

)

Share-based compensation expense

 

 

 

 

 

 

 

 

4,044

 

 

 

 

 

 

 

 

 

4,044

 

Unrealized loss on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

(144

)

 

 

 

 

 

(144

)

Translation gain

 

 

 

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

17

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,963

)

 

 

(31,963

)

Balance at March 31, 2018

 

 

49,196,685

 

 

$

5

 

 

$

2,087,487

 

 

$

(241

)

 

$

(1,503,116

)

 

$

584,135

 

Issuance of common stock to underwriters, net

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

(5

)

Issuance of common stock upon exercise of options

 

 

106,364

 

 

 

 

 

 

1,948

 

 

 

 

 

 

 

 

 

1,948