Arena Pharmaceuticals (ARNA) Beats on Q4 Earnings & Revenues

Arena Pharmaceuticals, Inc. ARNA reported earnings of $1.35 per share in the fourth quarter of 2018, which surpassed the Zacks Consensus Estimate of a loss of 76 cents. The bottom line also improved from a loss of 35 cents incurred in the year-ago period.

Total revenues came in at $8.6 million, down 43.7% from the year-earlier period. However, the top line outpaced the Zacks Consensus Estimate of $3.43 million. Revenues comprised $1.8 million as royalty revenues and $6.9 million as collaboration revenues.

Shares of Arena increased 2.3% in pre-market trading on Feb 26, presumably on better-than-expected results. Moreover, the stock has gained 29.9% in the past year.

Research & development (R&D) expenses soared 82.9% from the prior-year level to $37.9 million.

General and administrative expenses surged 86.6% from the year-ago level to $15.4 million.

Full-Year Results

Arena reported total revenues of $18 million in 2018, down 15.8% on a year-over-year basis. However, loss per share narrowed to 63 cents compared with $2.77 in the year-ago period.

Restructuring Update

In January, Arena closed a deal with United Therapeutics UTHR out-licensing global rights to ralinepag — its late-stage candidate for the treatment of pulmonary arterial hypertension (“PAH”). United Therapeutics is now responsible for further development and commercializing the candidate.

Per the terms of the deal, Arena is eligible to receive up to $1.2 billion including an upfront payment of $800 million, potential milestone up to $400 million and tiered low double-digit royalties on the net sales of ralinepag from United Therapeutics.

Pipeline Update

Arena’s pipeline currently consists of two key candidates, namely etrasimod (autoimmune diseases) and Olorinab (pain and fibrotic diseases).

Etrasimod, a once-daily oral sphingosine-1-phosphate (S1P) modulator, is being developed for the treatment of Ulcerative colitis (“UC”), Crohn's disease (“CD”) and Atopic dermatitis (“AD”). While a late-stage study on UC is being planned following positive data from the phase II OASIS study, two separate mid-stage studies are expected to start soon for treating CD and AD.

Olorinab, a cannabinoid 2 (CB2) receptor agonist, is being developed for treating visceral pain associated with gastrointestinal disease. A phase IIb is being planned to evaluate the candidate for treating the indication.

Apart from these two candidates, Arena plans to launch APD418 — a first-in-class calcium-independent myofilament derepressor ("CMD") — which is in preclinical studies for the treatment of decompensated heart failure. The company plans to move the candidate into clinical studies in 2019.

Zacks Rank & Key Picks

Arena currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the healthcare sector include Celgene Corporation CELG and Genomic Health, Inc. GHDX, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Celgene’s earnings estimates have been revised 5.3% upward for 2019 and 9.2% for 2020 over the past 60 days. The stock has rallied almost 40% so far this year.

Genomic Health’s earnings estimates have moved north 17.9% for 2019 and 13.9% for 2020 over the past 60 days. The stock has gained 20.3% so far this year.

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