Arena Pharmaceuticals, Inc.
Q4 2014 Earnings Call Transcript

Published: 3 Mar 2015

[Operator:]

Good day, everyone. And welcome to Arena Pharmaceuticals Fourth Quarter and Full Year 2014 Financial Results Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Arena’s Senior Director of Investor Relations, Mr. Scott Rieger. Mr. Rieger, please go ahead.

[Scott Rieger:]

Thank you. Good afternoon and thank you for joining us. We hope you had a chance to review the news release we issued earlier this afternoon, announcing our financial results for the fourth quarter and full year 2014. Joining me on today’s call with prepared remarks are Jack Lief, our President and CEO; Craig Audet, our Senior VP of Operations and Head of Global Regulatory Affairs; and Robert Hoffman, our CFO. Dominic Behan, our Chief Scientific Officer is also available to address your questions. William Shanahan, our Chief Medical Officer is offsite today. During this call, we will make forward looking statements about our goals, plans, expectations, and future activities and events, including statements about BELVIQ and our drug candidates, including efficacy, safety, R&D, regulatory applications, collaborations and potential; commercialization of BELVIQ, including marketing, reimbursement and product supply, financial results, condition and guidance, and other statements that are not historical facts. Such statements may include the words, plan, expect, believe, may, will, can or similar words. You are cautioned to not place undue reliance on these forward looking statements, which represent our judgment and beliefs only as of the time they are made. For such statements, we claim the protection of the Private Securities Litigation Reform Act of 1995. Risks and uncertainties that could cause actual results to differ materially from our forward looking statements include those related to, the timing, results and cost of R&D, manufacturing and commercialization; the regulatory process and decisions; data and other information related to drugs and drug candidates may not be as expected, favorable, or sufficient for further development or commercialization; collaborations; and other risks identified in today’s financial results press release, as well as our SEC filings. I will now turn the call over to Jack.

[Jack Lief:]

Good afternoon and welcome to our call today. 2014 was a highly productive pivotal year for Arena. It was of course our first full year of BELVIQ sales, with almost 0.5 million prescriptions filled for the drug. It was also a year during which we advanced multiple development programs that we believe will drive significant value for Arena. Going forward, we plan to build on this momentum by working closely with our collaborators worldwide to support commercialization of BELVIQ and by further advancing our GPCR targeted drug development program, including our Lorcaserin Lifecycle Management initiative, as well as our pipeline of internally-discovered novel clinical stage drug candidates. Among our top priorities is APD334, Arena’s oral drug candidate that targets the S1P1 receptor for the potential treatment of autoimmune diseases. Based on the impressive result announced earlier this year from our Phase 1b trial, we are advancing APD334 into Phase 2 clinical trial for ulcerative colitis and Crohn's disease. Also a priority is ralinepag, our oral, non-prostanoid prostacyclin receptor agonist currently being studied for the treatment of pulmonary arterial hypertension. Earlier this year, we initiated patient dosing in a Phase 2 clinical trial. Moving to our Lifecycle Management program for Lorcaserin, last year, we announced positive clinical trial results from both our smoking cessation and Eisai's phentermine coadministration initiative and advanced development of our once-daily extended release formulation. Each of these initiatives represents unique opportunities to create additional value. Before turning the call over to Craig to expand on recent activities surrounding BELVIQ and our development programs, let me provide a brief update on BELVIQ. During the fourth quarter, the number of prescriptions filled for BELVIQ totaled approximately 149,000. This represents an increase of 152% over the fourth quarter of 2013, compared to the third quarter of 2014, BELVIQ prescriptions were up 4% even though the overall market was down 4% due to seasonal trends. Since the launch in the U.S., the total number of prescriptions filled now total about 700,000 and the number of healthcare providers who have prescribed BELVIQ exceeds 72,000. With seasonal demand in the New Year, combined with early impact of Eisai’s recently updated sales and marketing program, we have seen positive prescription trends to date in 2015. Total weekly scripts exceeded 13,000 for the first time since product launch. And BELVIQ continues to be the market leader among the most recently introduced oral agents. We expect BELVIQ prescription and revenue growth to benefit this year from Eisai’s newly introduced marketing activities and by the recent launch of the product in South Korea by our collaborator, Ildong Pharmaceutical. I’ll now turn the call over to Craig, followed by Robert, who will review our financial results for the fourth quarter and full year 2014 before opening the call to your questions. Craig?

[Craig Audet:]

Thanks Jack and good afternoon everyone. I would like to start by elaborating on Jack’s comments on BELVIQ. As mentioned, in January of this year, Eisai announced its updated marketing strategy. This refinement launched at the time of year when patients are highly focused on weight management, reflects Eisai’s learnings relative to its approach to patients, physicians and payers. A cornerstone of this strategy is Eisai’s new pay no more than $75 savings program that makes BELVIQ more affordable and accessible to cash paying patients. Since its launch in mid January, savings card [indiscernible] have been on the rise, which should translate to increased prescriptions over time. Eisai’s revised strategy also places additional emphasis on driving patient demand through direct-to-consumer marketing such as television broadcast advertising and digital outreach. Eisai has also refocused a dedicated sales force on physicians who are current prescribers of weight management drugs. We believe this newly refined marketing mix will have a favorable impact on BELVIQ prescription growth. Script growth in 2015 should also reflect the launch of BELVIQ in South Korea. Illdong plans to target obesity experts with 27 dedicated medical representatives with another 370 general medical representatives calling on healthcare professionals. Illdong has set the wholesale acquisition cost of one-month supply at approximately $90. South Korea is a country of approximately 50 million people with a growing problem of obesity and health-related issues such as diabetes and cardiovascular disease. So we are optimistic about the potential of this market. Let me now turn to our product development programs, regarding our lorcaserin lifecycle management program, in 2014, we reported positive results from our smoking cessation proof-of-concept study, the phentermine combination trial and we advanced our once daily extended release formulation development program. Regarding our smoking cessation program, results reported in late 2014 from our Phase 2 clinical trial provided what we believe is the first ever proof-of-concept that a selective serotonin 2C agonist may have a positive treatment effect. We recently held a meeting with several world experts on smoking cessation to review the study results and advise on further development. Arena is now finalizing our plans in preparation for meeting with the FDA in anticipated registration trials later this year. Advancing lorcaserin as an aid to smoking cessation represents a significant opportunity for Arena and for millions of people who want to quit smoking. Approximately 18% of U.S. adult still smoke which equates to about 42 million people. Globally this figure was estimated at 967 million people in 2012. Annual worldwide sales of antismoking therapies totaled 1.5 billion with the leading prescription product contributing about 650 million to this figure. BELVIQ, if approved for smoking cessation, could be a unique product in this market since weight gain is a common consequence of and deterrent to quitting smoking. Regarding co-administration of lorcaserin and phentermine, pilot study results reported in late 2014 show the treatment with lorcaserin plus phentermine was not associated with an exacerbation of pre-specified adverse event and resulted in more than double the weight loss in lorcaserin alone. We anticipate a meeting with the FDA around midyear to further explore our development options. We believe that the combination of two approved weight loss products with different mechanisms of action could complement each other and lead to improved efficacy. For our once-daily extended release formulation, we have now completed dosing in the registration trials and are in the progress of gaining feedback from the FDA on the format and content of our planned NDA application. And we're working with Eisai to prepare for that filing. We look forward to updating you on our lifecycle management programs for BELVIQ once we have received feedback from the FDA and finalize our development strategies. Focusing now on our pipeline of clinical stage drug candidates, I will begin by reviewing recent developments with APD334 and the market opportunities we see for this candidate. In January, we announced positive results from our Phase 1b multiple-ascending dose clinical trial, showing dose dependent lymphocyte lowering with up to 69%, with no clinically significant safety findings relative to cardiovascular, liver or pulmonary functions. We believe the findings from this trial suggest that APD334 has all the hallmark of a competitive S1P1 modulator. Based on the results, we plan to start two Phase 2 proof-of-concept studies this year, one in ulcerative colitis and one in Crohn's disease. According to IMS, the current inflammatory bowel disease market is over $7 billion in worldwide sales, with $5 billion in Crohn's disease alone but the opportunities for APD334 doesn’t stop there. We believe that it could be effective in other autoimmune conditions such as multiple sclerosis. Turning to ralinepag, as Jack indicated, we initiated patient dosing in our Phase 2 clinical trial in January. This trial will evaluate the hemodynamic and exercise tolerance effects, as well as safety and tolerability of multiple ascending doses of ralinepag in up to 60 patients with pulmonary arterial hypertension. Our objective with ralinepag is to bring to market an efficacious once-daily oral drug that approximate the continuous therapeutic exposure of currently available IV infused prostacyclin receptor agonist. Ralinepag is very potent and highly selective and is believed to prevent vasoconstriction, as well as inhibit vascular remodeling and platelet aggregation. In addition, we believe that ralinepag’s relatively low peak-to-trough ratios will result in improved tolerability. Sales of products indicated to treat PAH exceeded $6 billion in 2013 in the top seven global markets. Despite the drawbacks of IV and inhaled dosing, the prostacyclin analogos are foundational therapies with nearly $3 billion in sales. Given ralinepag’s attributes, we believe they could be used earlier in the treatment paradigm and thus potentially benefit a broader segment of PAH patients. Finally, regarding APD371, our orally available CB2 agonist in development for pain, we continue dosing in our Phase 1 single-ascending dose trial. Selectively targeting the CB2 receptor in pain may provide therapeutic benefit without the potential for dependence or abuse associated with opiates and without the G.I. and CV side effects associated with NSAIDs. We also plan to explore APD371 for fibrosis. I will now hand the call over to Robert who'll review our financials.

[Robert Hoffman:]

Thanks, Craig. I will focus my comments on financial performance highlights for the full year ended December 31, 2014, compared to full year ended December 31, 2013. Please note our fourth quarter 2014 results are included in our news release issued earlier today. I’m happy to take questions during the Q&A portion of this call, on either the quarterly or annual results. For 2014, we recorded revenues of $37 million, compared to $81.4 million for 2015. 2014 revenues included $16 million from net product sales of BELVIQ, $10.5 million in reimbursements from Eisai for development and patent and trademark expenses, $8.2 million from amortization of upfront payments and milestone payments totaling $500 earned in connection with Eisai application for regulatory approval of BELVIQ in Brazil. 2013 revenues were higher than 2014 revenues primarily because in 2013, we earned $65 million of milestone payments from Eisai in connection with the final scheduling designation for BELVIQ. Of the $16 million from net product sales of BELVIQ, $14.2 million represented 31.5% of Eisai’s net product sales, $1.3 million related to redemptions of vouchers and $0.5 million related to product sampling. Arena and Eisai currently recognized net product sales revenue and Eisai shipped its product to wholesalers. During 2014, Eisai shipped approximately 430,000 bottles of BELVIQ. Primarily due to the new pay no more than $75 savings card program recently implemented by Eisai, the full year 2014 gross to net discount increased to 47% from 43% for the nine months ended September 30, 2014. Cost of product sales of BELVIQ totaled $6.4 million for 2014 and $1.8 million for 2013. Research and development expenses for 2014 increased to $100.3 million from $66.5 million for 2013. The increase is primarily attributable to external clinical and preclinical study fees and expenses including manufacturing costs, in particular related to smoking cessation trial for BELVIQ and our portion of the CVOT study and personnel costs. R&D expenses 2014 included $7.1 million in noncash share-based compensation expense compared to $4.3 million for 2013. R&D expenses for 2014 also included $10 million reimbursed by Eisai and included in revenue compared to $2 million for 2013. G&A expenses totaled $34.1 million for 2014 compared to $31.7 million for 2013. The increase was primarily related to personnel costs. G&A expenses for 2014 included $6.4 million in noncash share-based compensation expense compared to $4.7 million for 2013. G&A expenses for 2014 and 2013 also included $0.4 million in patent and trademark expenses reimbursed by Eisai and included in revenue. We recognized the gain of $49.6 million related to our shares we held in TaiGen in 2014. We recorded a noncash gain of $10.2 million in 2013, primarily related to evaluation of a common stock warrant that is classified as derivative liability. Net loss allocable to common stockholders was $60.5 million for 2014 or $0.28 per share on a fully diluted basis compared to a net loss of $19.4 million for 2013 or net loss of $0.09 per share fully diluted. At December 31, 2014, cash and cash equivalents totaled $163.2 million and we had approximately 220.3 million common shares outstanding. Cash and cash equivalents and common shares outstanding at December 31, 2014, do not include net proceeds of $100.7 million from the sale of 21 million common shares completed in January 2015. With regard to 2015 financial guidance, we expect the majority of our 2015 revenues will be payments from collaborators based on their net product sales of BELVIQ. Arena will receive 31.5% and 35% of Eisai’s and Ildong’s net product sales of BELVIQ respectively. We are currently not able to predict the amount of these sales, and because of these, are not providing guidance on our overall 2015 revenues at this time. A lesser amount of Arena’s total 2015 revenues will consist of regulatory milestones, including the $3 million milestone achieved from the approval of BELVIQ in South Korea in February 2015, amortization of upfront payments from existing collaborations expected to be approximately $8 million, development and patent and trademark reimbursements from Eisai expected to be approximately $7 million, and toll manufacturing from Siegfried expected to be approximately $1 million. We expect full year 2015 research and development expenses of approximately $114 million to $122 million, including non-cash expenses of approximately $13 million and approximately $6 million in development expenses reimbursed by Eisai and included in revenue. This R&D expense guidance includes approximately $56.9 million in external preclinical and clinical spend related to lorcaserin lifecycle management programs, the CVOT study for BELVIQ and our clinical stage programs, Craig outlined. For clarity, when Arena is conducting a clinical trial under our collaboration with Eisai, we record 100% of the expenses under R&D expense and any amount reimbursed by Eisai is recorded as revenue. Conversely, if Eisai is conducting a clinical trial, we record only our expense related to that trial. For example, Arena -- excuse me, Eisai is conducting the CVOT trial, as such we are recording 10% of the overall required cost to research and development expenses. Full year 2015 G&A expenses are expected to be approximately $33 million to $39 million, including non-cash expenses of approximately $9 million and approximately $1 million in patent expenses reimbursed by Eisai, included in revenue. We expect to spend approximately $8 million to $9 million in capital expenditures, primarily related to our manufacturing facility in Switzerland. Importantly, we will continue to carefully manage expenses, taking into account our revenues and shared costs with collaborators. I’ll now turn the call back over to Jack.

[Jack Lief:]

Thanks, Robert. Before taking your questions, let me conclude by saying that we are optimistic about opportunities to create additional value, both through continued growth in BELVIQ sales and through our development programs. We believe the intrinsic value of our development program assets will increase significantly in 2015, as we advance our candidates in multiple late-stage clinical trials, file an NDA for our QD lorcaserin formulation and report additional clinical data, including results from our Phase 1 APD371. We look forward to updating you on our progress over the course of the year. Thank you for your interest in Arena. And we will now open the call to question. [Jane] [ph].

[Operator:]

[Operator Instructions] The first question comes from Ted Tenthoff from Piper Jaffray.

[Jack Lief:]

Ted.

[Ted Tenthoff:]

Great. Can you hear me? Okay. Sorry about that.

[Jack Lief:]

Yes.

[Ted Tenthoff:]

So thank you very much for all the guidance and update very helpful and congrats on all the progress both with BELVIQ and also with the pipeline, very exciting time for the company. I guess, my one question is actually maybe a little bit offbeat, but with respect to the [Cannabinoid][ph] work that you guys are doing is there anything that would support some of the recent work with respect to biology regarding epilepsy or seizures or anything like that? Or is this a different mechanism or different parts of the cannabinoid pathway?

[Jack Lief:]

Yes. So that's a good question. What we did was we looked at other CB2 compounds. Some of these did not work in pain. And we figured out what was different about our compound versus others and we engineered it, such that it was indeed different. Dominic, do you want to elaborate on that?

[Dominic Behan:]

Sure. What we've really focused on is the intrinsic efficacy on the CB2 and the recycling process of the receptor. So what I mean by that is the extent of agonism on the receptor. And so this particular compound that we have has very good agonism, full agonism on this receptor in terms of comparison to various reference compounds. So we think it will be important for recycling of the receptor to the cell surface. And we think that’s important because we believe that’s necessary to avoid desensitization. And the early evaluation, preclinical evaluation suggests that we don't have desensitization and we’ll keep an eye on that as the program progresses. But that’s what we’ve concentrated on in terms of preclinical optimization in terms of the receptor pharmacology.

[Ted Tenthoff:]

And that Phase 1 data should be in the first quarter, right?

[Jack Lief:]

We’re right now dosing the first Phase 1 study. So you'll recall the purpose of Phase 1 is to achieve the maximum -- determine the maximally tolerated dose. And the good news is that we haven’t yet convinced ourselves that we are there yet, but we are evaluating this last dose and we’ll see whether we have to move on to yet another dose so we are finished. So stay tuned.

[Ted Tenthoff:]

Great. And then if I may ask a follow-up question, just with respect to BELVIQ, congrats on South Korea? What are some of the other potential regulatory overseas geographies that we could see with approvals this year?

[Craig Audet:]

Hi, Ted. It’s Craig. We have Eisai’s filed as you know in Brazil and Mexico. And so that is a potential for this year. The -- I say potential because it -- those jurisdictions are very different than the U.S. or Europe, which give you that PDUFA date in the U.S. or that -- those 210 days in Europe. So it’s sort of an open ended review. So it remains to be seen if they’ll get it done this year, but we are hoping.

[Ted Tenthoff:]

Thank you.

[Operator:]

The next question comes from Thomas Wei from Jefferies.

[Thomas Wei:]

Thanks. Just on APD334, wanted to just double check on the heart rate or cardiac effects, where there any outliers that you saw in the data?

[Jack Lief:]

Well, as you know, most products in this class, all products that we are aware off, have some heart rate reduction for S1P1. There was a modest impact on heart rate. But all changes were asymptomatic and classified by investigators as not clinically significant. So far the drug is really well tolerated. But keep in mind this is a Phase 1 study of only 50 people. So we’ll have to say tuned.

[Thomas Wei:]

And I guess, I am curious to hear what your theory is around that the lack of the side effects that are seen with the class the cardiac, the liver and the pulmonary, even relative to some of the other S1P1 inhibitors that claim to be very highly selective and perhaps even more selective than 334 on paper? What do you think is going on with that?

[Jack Lief:]

Dominic.

[Dominic Behan:]

Well, I can hypothesize in terms of the selectivity. Firstly, we think it’s important to avoid the S1P3 receptor. That receptor has been linked to fibrotic endpoints for example in various studies. So we don’t have any S1P3 activity. I also think the Kinetics is important in terms of engagement. So a more gentle engagement of S1P1 in relation to the cardiovascular effects I think is desirable and that’s perhaps why various companies and various people in the field have looked at titration as a means to address that. And so those are the things that we’ve really concentrated on more the extent of engagement, the Kinetics of engagement and also avoiding some receptors that have endpoints that we believe are undesirable.

[Thomas Wei:]

Great. And then, lastly on ralinepag, what is the latest on timing for a data read out there? And if there anything that you can do to accelerate that data read out to obtain proof-of-concept?

[Jack Lief:]

Well, we are looking at this and the study is ongoing right now and studies like this typically enroll quite slowly. So we are looking at increasing the number of sites and that sort of thing. But our previous guidance was around the end of next year and I think that’s probably current. Tom?

[Thomas Wei:]

Sorry. I was on mute. Thanks very much. That’s very helpful. When you mean end of next year, you mean end of 2016?

[Jack Lief:]

Yes.

[Thomas Wei:]

Okay.

[Jack Lief:]

Yes.

[Thomas Wei:]

Thanks.

[Jack Lief:]

So it will take about a year to enroll and the study is ongoing.

[Thomas Wei:]

Great. Thank you.

[Jack Lief:]

Welcome.

[Operator:]

The next question comes from Alan Carr from Needham & Company.

[Alan Carr:]

Hi. Thanks for taking my questions. Can you give us an update on timing for these meetings with the FDA around smoking cessation and combination with phentermine and a little bit of an update on what your goals there in terms of your ideal trial designs? And then also with respect to 334 expectations for size and how long those trials might take? Thanks.

[Jack Lief:]

Craig?

[Craig Audet:]

Sure. Hi, Alan. The -- so what we said with both smoking and combo are on a similar path and that what we need to do is finalize development strategy for those and then go and speak to the FDA and then based on any comments we get finalize and initiate. In terms of smoking, I think, we are looking at an FDA meeting sometime in the -- potentially in the second quarter, same thing with combo for the most part. Part of this is making sure that that we finalized our plans and had the appropriate discussions with Eisai and to make sure that we are all on the same page before we move forward. In terms of 334 -- in terms of study designs we really don’t want to say much about that at this point, because we’d really like to have the discussions with the agency before we guide on study design. We don’t want to tell you something now and then have to come back and update that later on. 334 is sort of a similar path. We are in the process of finalizing the protocols based on our experts input. We plan to meet with the FDA a little bit earlier in that study, probably, in this quarter and we're targeting trying to get study started sometime around midyear with study completion read out, perhaps mid to end of next year. That is if the feedback from FDA is very, very positive and in line with our study designs, if we can you get all the sites up and initiated in time. In other words, it’s in a best world if we can get everything running and get those patients enroll quickly we should see some results potentially by the end of next year.

[Alan Carr:]

Okay. Thanks very much.

[Craig Audet:]

Sure.

[Operator:]

The next question comes from Jessica Fye from JP Morgan.

[Jessica Fye:]

Hey. Thanks. Just a couple quick questions. First, on APD334, is there any plan to present that Phase 1b data at medical conference coming up? Second, another pipeline one, maybe getting ahead of myself here, but recognizing you still running the study, can you elaborate on potential clinical differentiation of ralinepag relative to Ranitidine or Selexipag? And then, lastly, just with respect to gross to net, can you comment around your gross net expectations for 2015 or if not, maybe just what you have seen so far in the first two months of the year? Thanks.

[Jack Lief:]

Sure. I’ll let Dominic first take the question about the differentiation for ralinepag.

[Dominic Behan:]

Ralinepag. Sure. From a preclinical point of view we’ve looked at various parameters. Firstly, we have done quite of lot of analysis at Arena looking at what we call spare receptors, so when you over express receptors in various cell lines, you have what’s co-list spare receptors are excess receptors that exaggerate the pharmacology. So we always like to compare from pharmacologies in the absence of those receptors. We do that -- we have done that in the past by knocking down receptors. But the bottomline is we want to have the situation where you got receptors bit more closely matched situation in vivo and then we compare pharmacology. And so one area we focused on is the degree of agonism. We think and ralinepag has a good efficacy. It has a full agonist compare -- it is a full agonist compared to some competitors. That’s one area we focused on. We think that’s important because we think it translates into in vivo effects such as vitro dilation for example. The other area is potency, potency on some of these effects such pulmonary arterial smooth muscle cell effect that could be related to things like remodeling effects, so this is very potent, we focused on that. We also have some platelet activity of this compound and we think platelets are under appreciated in the field, because they release many vitro active substances, growth factors that could be important for remodeling effects and this compound is also active on platelets. So we think that’s important as well in terms of comparative efficacy, at least from a preclinical point of view and of course we have proved that that’s clinically relevant. And also the PK/PD is very important we believe because the goal here has been to come up with the compound and exposure that very closely matches IV infusion. So it has a very low peak trough ratio. And we think that’s important because that’s the most -- it’s been shown to be the most effective way to give a prostacyclin. And so this compound has a very low, very smooth peak-to-trough ratio that we think mimics IV infusion. So those are really the fundamental parameters that we’ve concentrated on. And we will have to see how these translate into clinical efficacy and safety as we move forward in our trials.

[Jack Lief:]

Robert will take the next part of your question.

[Robert Hoffman:]

Hi Jessica. In terms of gross to net, we did announce for the full year at 47%. If you do the math, the quarter was 58% and that really related to the introduction of the savings card program that pay no more than $75. In terms of 2015, that should moderate out. In the third quarter, it was 43%. 58%, I would expect going forward somewhere in the middle and for 2015. The wild card is Eisai has a really high performance reimbursement group. And I expect to have good news along the year in terms of additional reimbursement which would -- we do expect growth from that discount over the year. And Jessica, what was the first part of your question, again?

[Jack Lief:]

Polishing the data?

[Robert Hoffman:]

Polishing the data, right. So we haven’t as far as I know, decided whenever we have to publish that data, we’re entirely focused on getting the next set of clinical trials, running in meeting with FDA. So we’ll let you know when we know.

[Jessica Fye:]

Thank you.

[Operator:]

Our next question comes from Jason Butler from JMP Securities.

[Jason Butler:]

Hi. Thanks for taking the question. Just a follow-up on the smoking cessation path forward. Just based on the meetings, you had -- discussions you had with opinion leaders. Can you maybe talk broadly to about what you think could be similar or different to other Phase 3 programs or smoking cessation drugs on what you think you can determine differentiated label for lorcaserin?

[Jack Lief:]

Well, keep in mind that most of our patients that were enrolled at least half of them had tried other smoking cessation drugs and they failed. So I think intrinsically a new drug could address some of the issues that old drugs did not. Having said that, it’s variable and I think having a weight neutral or slightly weight negative effect could be a good thing because other drugs, as you know, cause some weight gain and a lot of patients don't want to stop smoking because they are afraid of gaining weight. So in some patients that actually stop smoking and do gain weight, go back to smoking so that they can lose that weight. So I think there’s a benefit from lorcaserin in that regard. Did I skip anything? Okay. So those are the key attributes there and we’ll see once we have moved into our next set of studies.

[Jason Butler:]

Okay. That’s helpful. Thanks. And then just one last one on the -- how we think about the redemptions from the free trial voucher portion of the revenue. Is this something that will remain or will become promotional to prescription growth or is it not that predictive?

[Jack Lief:]

Well, the free goods, the 15-day voucher redemption have been going down recently. And the other aspects, these savings cards, I’m sure have been increasing. But that’s really up to Eisai, how they are going to be doing this and…

[Craig Audet:]

Yeah. I think Eisai has put a really nice price point in place that will see whether that has eat into the vouchers. But I don’t think it’s a good -- necessarily good indicator of prescriptions and just recall that we get paid cost of goods sold related to that. Eisai does have a pilot sampling program as well and so that is not included in IMS data. So that’s something in addition to the numbers that we see in terms of prescriptions.

[Jason Butler:]

Okay. That’s helpful. Thanks again for taking the questions.

[Operator:]

The next question comes from Simos Simeonidis from RBC Capital Markets.

[Simos Simeonidis:]

Hi, guys. Thank you very much for taking the questions. Robert, for the guidance you provided for R&D for next year, the $114 million to $122 million, can you give us a rough idea how much of that is going to be for BELVIQ versus the pipeline programs?

[Robert Hoffman:]

We haven’t given that breakdown but I will tell you that that does include the CVOT study, which is quite expensive overall and our 10 plus percent share is not inexpensive. So that includes that. It also includes the smoking cessation study, which -- we will see if that gets includes but we haven’t given that breakdown. The total overall was roughly in the $56 million that I gave in the script.

[Simos Simeonidis:]

Okay. And then in terms of helping us, get a grasp around the South Korean opportunity for BELVIQ. You mentioned two numbers that I wasn't able to get right away. 27 medical professionals for Ildong and you mentioned a number of 370. Is that personnel from Ildong that will be exclusively for BELVIQ?

[Craig Audet:]

Simos, it is Craig. The 27 are dedicated to BELVIQ and they are dedicated to seeing obesity specialists, but they also have a larger field force. So the larger field force is the 370 that will have BELVIQ in their bag.

[Simos Simeonidis:]

Okay. So the 27, are they sales people, are they MSL?

[Craig Audet:]

The 27 are sales people that will just carry BELVIQ and the 370 is the rest of their field force that will have BELVIQ in their bag. I don’t know the positioning at this point.

[Simos Simeonidis:]

Excellent. Okay. Thank you very much.

[Craig Audet:]

Sure.

[Operator:]

The next question comes from Bob Ai from Wallach Beth.

[Bob Ai:]

Thank you for taking my call. Can you hear me well?

[Jack Lief:]

Yes.

[Craig Audet:]

Yes.

[Bob Ai:]

Okay. Many of my questions already been answered. But just one, can you give data on the insurance coverage and I know you certainly you didn’t had in the past quarters update?

[Craig Audet:]

Yeah. It’s still roughly 70% of private lives covered according to Fingertip Formulary. Now, it is a little bit less than that based on how they calculate underwriters on other one up but it is roughly right around 70%. Again, Eisai, it is a really well performing group of players. The other thing that Robert didn’t mentioned is Bob is that Eisai has been focusing also on the mega employer so. So in J&J, Ford Motor Company, Home Depot, companies like that as well. They don’t show up in that 70% number I don’t believe.

[Bob Ai:]

Okay. Craig, early you mentioned that you had the smoking cessation meeting with an expert. What kind of -- any comments from them that that’s affecting you or nothing -- I mean all their comments are with expectation?

[Craig Audet:]

I think not to get into too much detail, but I think we were very happy with the extent of the feedback that we received both on the study we ran, as well as potential future study designs and then very specific elements in that -- of those future designed to increase the quit rates. Things that were a little bit different in the study that we ran. So, I think that all-in-all, it was a very good meeting in terms of looking forward to where we might go with this.

[Bob Ai:]

Okay. Thank you.

[Operator:]

The next question comes from Matthew Andrews from Wells Fargo.

[Matthew Andrews:]

Good afternoon. Thanks for the opportunity to ask a couple questions. Craig, can you give us an update on the BELVIQ re-filing in Europe and Bob, does the guidance include $19 million payroll to Eisai? Thanks.

[Craig Audet:]

In terms of the $19 million payable, I gave guidance on the income statement, not on the balance sheet. So some of that little be repaid. Reconciliation at March 31st, so it will be paid since 30 days thereafter.

[Jack Lief:]

In terms of the EU, Matthew, we had -- last year we and Eisai met individually with the Raptor and with the core Raptor. The purpose of those two meetings was twofold. One was to introduce Eisai as the new regulatory lead on any resubmission. And then also so Eisai can hear first-hand, the issues that the Raptor and/or core Raptor had with the application and started formally how to address those. So we’ve been working on a strategy since that time. We’re starting to look at some additional ways to answer those questions. And so filing right now, I believe, it could be sometime around the end of Eisai’s fiscal year that's not confirmed but sometime around at the end of that fiscal year.

[Matthew Andrews:]

Okay. Great. Thank you.

[Operator:]

I’m showing no further questions. I would now like to turn the call back over to Mr. Scott Rieger.

[Scott Rieger:]

Thank you. Arena is planning to participate in Needham & Company’s Healthcare Conference in New York in April and Bank of America Merrill Lynch’s Healthcare Conference in Las Vegas in May. This concludes our fourth quarter and full year 2014 financial results call. Thanks for joining us today and for your continued interest in and support of Arena Pharmaceuticals.

[Operator:]

Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.