Obesity Companies Prolong The Inevitable As Cash Runs Out
Executive Summary
Arena and Vivus both announce efforts to conserve cash and they struggle with virtually nonexistent sales of their obesity drugs. Neither company has laid out plans for next steps.
Things continue to look dire for the companies in the obesity space and talk of a turnaround for the biotechs is not on anyone's lips as cost-cutting measures continue to be utilized.
Arena Pharmaceuticals Inc. announced after the close on June 30 that it would be trimming the fat at the already slim company, reducing its workforce by another 73% -- or 100 staffers – as it tries to conserve cash.
The company expects the cuts to be complete by Aug. 31 and to come from positions in manufacturing, research and G&A. The cuts will reduce annual expenses for personnel by $17m and operating expenses by $6m to $8m. Arena also noted that other cost cutting measures are on the way, including reductions at its Swiss manufacturing facility.
Arena will incur a cost of $6.1m related to severance and employee termination costs.
These cuts come on top of a 35% reduction in staff, about 80 employees, that was put in place last October when founder and CEO Jack Lief was unceremoniously ousted.
Amit Munshi, former CEO of floundering biotech Epirus Biopharmaceuticals Inc., took over at the beginning of June, promising a new strategic focus for the company. With his move into the top slot at the beleaguered company, Arena also terminated its chief medical officer William Shanahan on June 13. (Also see "Q1 Earnings In Brief: Ironwood, Incyte, Arena, Ariad" - Scrip, 10 May, 2016.)
For now, Arena says it will focus its efforts and what little remaining cash it has on the advancement of its pipeline, including a Phase II compound for ulcerative colitis, a Phase II prostacyclin receptor agonist for the treatment of pulmonary arterial hypertension, and a Phase I cannabinoid being studied for pain indications.
Continued Decline
None of this should come as a surprise to shareholders. While Arena – as well as competitors Orexigen Therapeutics Inc. and Vivus Inc. – was once a Wall Street darling, the obesity market never lived up to expectations. Arena's Belviq (lorcaserin) only had sales of $45m in 2014, and those sales declined to $42m in 2015. In fact, sales of Belviq declined during every quarter of the year -- $12.8m in Q1, $12.1m in Q2, $9.2m in Q3 and $8m in Q4. (Also see "Obesity By The Numbers" - Scrip, 9 May, 2016.)
Belviq's poor performance has caused analysts to write off the product and has pushed Arena's marketing partner away. Japanese pharma Eisai Co. Ltd. signed on in 2010, but has gradually been decreasing its sales push behind the drug. While Eisai once had as many as 600 reps promoting Belviq, now there are fewer than 250 and the Japanese company is expected to exit the partnership. (Also see "Obesity Market Snapshot: Marketing Partners Giving Obesity The Slow Goodbye" - Scrip, 9 May, 2016.)
Vivus and Orexigen have had similar problem. Orexigen announced earlier this year that its marketing partner, Takeda Pharmaceutical Co. Ltd., had abandoned their deal after a series of missteps and equally dismal sales for Contrave (bupropion/naltrexone). (Also see "Third Time's The Charm? Orexigen Terminates CONVENE" - Scrip, 14 Apr, 2016.)
Meanwhile, Vivus was never able to land a partner to help promote Qsymia (phentermine/topiramate). For Vivus, like Arena, the company is having cash flow problems. The biotech had $241.6m in cash as of the end of 2015, but has $300m in debt that is due in 2020 and, like the other sponsors, is on the hook to conduct a cardiovascular outcomes trial as part of its post-marketing requirements for FDA that could run the company as much as $200m to $250m.
Vivus added to the newsflow June 30, admitting its partner Auxilium Pharmaceuticals Inc. – which it was partnered on for the erectile dysfunction drug Stendra (avanafil) – has agreed to prolong their separation. Auxilium pulled out of the partnership in December and the agreement was set to end June 30.
"We expect to make our decision on whether to commercialize Stendra on our own or with a third party in the near term. The extension with Auxilium will provide us with additional time to ensure no interruptions in the availability of Stendra to patients and health care providers while we complete our evaluation and process," said Vivus CEO Seth Fischer.