Quarterly Report (10-q)

Date : 08/09/2019 @ 11:06AM
Source : Edgar (US Regulatory)
Stock : Arena Pharmaceuticals Inc (ARNA)
Quote : 48.815  -0.095 (-0.19%) @ 1:00AM
After Hours
Last Trade
Last $ 48.81 ▼ -0.00 (-0.01%)

Quarterly Report (10-q)

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2018-01-01 2018-06-30

 

 

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 June 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 Augus t 2, 2019:

 

Class

 

Number of Shares Outstanding

Common Stock, $0.0001 par value

 

49,825,162

 

 

 

 


 

ARENA PHARMACEUTICALS, INC.

INDEX

 

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

1

 

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

1

 

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

2

 

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

4

 

Condensed Consolidated Statements of Cash Flows - Six Months Ended June 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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

Item 4.

Controls and Procedures

21

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

22

Item 1A.

Risk Factors

23

Item 6.

Exhibits

45

Signatures

46

 

 

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.

 

 

i


 

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

ARENA PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

200,059

 

 

$

161,037

 

Short-term investments, available-for-sale

 

 

806,093

 

 

 

284,594

 

Accounts receivable

 

 

1,824

 

 

 

5,086

 

Prepaid expenses and other current assets

 

 

20,778

 

 

 

10,008

 

Total current assets

 

 

1,028,754

 

 

 

460,725

 

Investments, available-for-sale

 

 

215,762

 

 

 

82,412

 

Land, property and equipment, net

 

 

23,493

 

 

 

23,114

 

Deferred tax assets

 

 

 

 

 

110,333

 

Other non-current assets

 

 

16,526

 

 

 

10,319

 

Total assets

 

$

1,284,535

 

 

$

686,903

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and other accrued liabilities

 

$

13,038

 

 

$

16,181

 

Accrued clinical and preclinical study fees

 

 

11,599

 

 

 

10,454

 

Current portion of lease financing obligations

 

 

3,541

 

 

 

3,283

 

Total current liabilities

 

 

28,178

 

 

 

29,918

 

Other long-term liabilities

 

 

7,770

 

 

 

1,301

 

Lease financing obligations, less current portion

 

 

47,598

 

 

 

49,426

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock

 

 

5

 

 

 

5

 

Additional paid-in capital

 

 

2,141,498

 

 

 

2,106,960

 

Accumulated other comprehensive income (loss)

 

 

1,307

 

 

 

(155

)

Accumulated deficit

 

 

(941,821

)

 

 

(1,500,552

)

Total stockholders' equity

 

 

1,200,989

 

 

 

606,258

 

Total liabilities and stockholders' equity

 

$

1,284,535

 

 

$

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

 

 

Six months ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United Therapeutics revenue

 

$

 

 

$

 

 

$

800,000

 

 

$

 

Royalty revenue

 

 

941

 

 

 

861

 

 

 

1,914

 

 

 

1,588

 

Collaboration and other revenue

 

 

81

 

 

 

3,133

 

 

 

165

 

 

 

4,161

 

Total revenues

 

 

1,022

 

 

 

3,994

 

 

 

802,079

 

 

 

5,749

 

Operating Costs and Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

51,211

 

 

 

26,755

 

 

 

96,607

 

 

 

48,328

 

General and administrative

 

 

18,367

 

 

 

10,405

 

 

 

34,945

 

 

 

21,556

 

Transaction costs

 

 

 

 

 

 

 

 

14,573

 

 

 

 

Total operating costs and expenses

 

 

69,578

 

 

 

37,160

 

 

 

146,125

 

 

 

69,884

 

Income (loss) from operations

 

 

(68,556

)

 

 

(33,166

)

 

 

655,954

 

 

 

(64,135

)

Interest and Other Income (Expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

7,595

 

 

 

2,502

 

 

 

14,082

 

 

 

3,276

 

Interest expense

 

 

(1,222

)

 

 

(1,448

)

 

 

(2,463

)

 

 

(2,920

)

Other income

 

 

780

 

 

 

279

 

 

 

1,491

 

 

 

813

 

Total interest and other income (expense), net

 

 

7,153

 

 

 

1,333

 

 

 

13,110

 

 

 

1,169

 

Income (loss) from continuing operations before income taxes

 

 

(61,403

)

 

 

(31,833

)

 

 

669,064

 

 

 

(62,966

)

Income tax provision

 

 

 

 

 

 

 

 

(110,333

)

 

 

 

Income (loss) from continuing operations

 

 

(61,403

)

 

 

(31,833

)

 

 

558,731

 

 

 

(62,966

)

Loss from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

(830

)

Net income (loss)

 

$

(61,403

)

 

$

(31,833

)

 

$

558,731

 

 

$

(63,796

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share, basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(1.24

)

 

$

(0.65

)

 

$

11.27

 

 

$

(1.41

)

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

(0.02

)

 

 

$

(1.24

)

 

$

(0.65

)

 

$

11.27

 

 

$

(1.43

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share, diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(1.24

)

 

$

(0.65

)

 

$

10.86

 

 

$

(1.41

)

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

(0.02

)

 

 

$

(1.24

)

 

$

(0.65

)

 

$

10.86

 

 

$

(1.43

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

49,653

 

 

 

49,263

 

 

 

49,566

 

 

 

44,655

 

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

 

 

49,653

 

 

 

49,263

 

 

 

51,459

 

 

 

44,655

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(61,403

)

 

$

(31,833

)

 

$

558,731

 

 

$

(63,796

)

Foreign currency translation gain (loss)

 

 

7

 

 

 

(50

)

 

 

(12

)

 

 

(33

)

Unrealized gain (loss) on available-for-sale investments

 

 

798

 

 

 

113

 

 

 

1,474

 

 

 

(31

)

Comprehensive income (loss)

 

$

(60,598

)

 

$

(31,770

)

 

$

560,193

 

 

$

(63,860

)

 

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

 

 

 

 

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 loss

 

 

 

 

 

 

 

 

 

 

 

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

 

Issuance of common stock upon vesting of restricted

     stock unit awards

 

 

20,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

4,530

 

 

 

 

 

 

 

 

 

4,530

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

113

 

 

 

 

 

 

113

 

Translation loss

 

 

 

 

 

 

 

 

 

 

 

(50

)

 

 

 

 

 

(50

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,833

)

 

 

(31,833

)

Balance at June 30, 2018

 

 

49,323,124

 

 

$

5

 

 

$

2,093,960

 

 

$

(178

)

 

$

(1,534,949

)

 

$

558,838

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4


 

ARENA PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

Operating Activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

558,731

 

 

$

(63,796

)

Adjustments to reconcile net income (loss) to net cash provided by (used in)

     operating activities:

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

 

 

 

830

 

Depreciation and amortization

 

 

1,555

 

 

 

1,902

 

Non-cash collaboration consideration

 

 

 

 

 

(1,500

)

Deferred income taxes

 

 

110,333

 

 

 

 

Share-based compensation

 

 

26,452

 

 

 

8,563

 

Amortization of prepaid financing costs

 

 

45

 

 

 

55

 

Amortization of original issue discounts, net of premiums, on available-for-sale

      investments

 

 

(3,428

)

 

 

(162

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

3,262

 

 

 

165

 

Prepaid expenses and other assets

 

 

(12,441

)

 

 

(635

)

Payables and accrued liabilities

 

 

(1,182

)

 

 

349

 

Accrued litigation settlement

 

 

 

 

 

(11,975

)

Deferred revenues

 

 

 

 

 

(646

)

Deferred rent

 

 

(789

)

 

 

(551

)

Net cash provided by (used in) operating activities - continuing operations

 

 

682,538

 

 

 

(67,401

)

Net cash used in operating activities - discontinued operations

 

 

 

 

 

(102

)

Net cash provided by (used in) operating activities

 

 

682,538

 

 

 

(67,503

)

Investing Activities:

 

 

 

 

 

 

 

 

Purchases of available-for-sale investments

 

 

(909,731

)

 

 

(25,477

)

Proceeds from sale and maturity of available-for-sale investments

 

 

259,784

 

 

 

46,900

 

Purchases of property and equipment

 

 

(1,934

)

 

 

(528

)

Other non-current assets

 

 

 

 

 

2

 

Net cash provided by (used in) investing activities - continuing operations

 

 

(651,881

)

 

 

20,897

 

Net cash provided by investing activities - discontinued operations

 

 

997

 

 

 

3,405

 

Net cash provided by (used in) investing activities

 

 

(650,884

)

 

 

24,302

 

Financing Activities:

 

 

 

 

 

 

 

 

Principal payments on lease financing obligations

 

 

(1,570

)

 

 

(1,976

)

Proceeds from issuance of common stock, net

 

 

8,086

 

 

 

387,009

 

Net cash provided by financing activities

 

 

6,516

 

 

 

385,033

 

Effect of exchange rate changes on cash

 

 

(11

)

 

 

548

 

Net increase in cash, cash equivalents and restricted cash

 

 

38,159

 

 

 

342,380

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

161,900

 

 

 

159,700

 

Cash, cash equivalents and restricted cash at end of period

 

$

200,059

 

 

$

502,080

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

5


 

ARENA PHARMACEUTICALS, INC.

Notes to