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Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)

Q2 2013 Earnings Conference Call

August 1, 2013 08:30 ET

Executives

Cindy McGee - Vice President of Investor Relations and Alliance Management

Jack Lief - President and Chief Executive Officer

Robert Hoffman - Chief Financial Officer

Craig Audet - Senior Vice President, Operations and Head of Global Regulatory Affairs

Dominic Behan - Chief Scientific Officer

Analysts

Matt Lowe - JPMorgan

Eileen McIntyre - Leerink Swann

Lee Kalowski - Credit Suisse

Ted Tenthoff - Piper Jaffray

Alan Carr - Needham & Company

Steve Brown - Bank of America

Jason Butler - JMP Securities

Operator

Good day everyone, and welcome to Arena Pharmaceuticals' Second Quarter 2013 Financial Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to the turn the call over to Arena's Vice President of Investor Relations and Alliance Management, Ms. Cindy McGee. Ms. McGee, please go ahead.

Cindy McGee

Thank you, Kevin. Good morning and thank you for joining us for our second quarter 2013 corporate update. By now, you should have a copy of our news release, which crossed the wire earlier this morning and is available on our website. With the availability of BELVIQ in U.S. pharmacies on June 11, our second quarter results reflect the first three weeks of the BELVIQ launch. Also please note that Eisai reported on financial results for the first quarter or first fiscal year earlier today.

On today's call, prepared remarks will be provided by Jack Lief, our President and Chief Executive Officer, Robert Hoffman, our Chief Financial Officer, and Craig Audet, our Senior Vice President of Operations and Head of Global Regulatory Affairs. Dominic Behan, our Chief Scientific Officer is also available to address your questions.

During this call, we will make forward-looking and other statements about our goals, plans, expectations and future activities and events, including statements about BELVIQ and our drug candidates, including with regard to efficacy, safety, R&D, advancement potential regulatory applications in collaboration, commercialization of BELVIQ, including with regard to physician and patient awareness, marketplace adoption and reimbursement, 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 those described in our forward-looking statements include, the regulatory process and decisions, the timing, results and cost of R&D, manufacturing and commercialization, data and other information related to drugs and drug candidates may not be as expected, favorable or sufficient for further development or commercialization, activates and results related to our collaborations and our entry into additional collaborations and other risks identified in our SEC filings.

I will now turn the call over to Jack.

Jack Lief

Good morning and thank you for joining us today. This is a great opportunity for our company as we build momentum through Eisai’s recent U.S. launch of BELVIQ .

Our efforts to bring the product to additional markets worldwide and our advancement of a pipeline of promising drug candidates internally discovered with our GBCR technologies. Eisai, our marketing collaborator introduced BELVIQ to the U.S. marketplace about six weeks ago. What's most important to us is that patients now have access to a much needed entirely new pharmaco therapy that with diet and exercise can help to lose weight and keep it off. Even though it is very early in the launch, we and Eisai are encouraged by the numerous calls, emails and social media communications from BELVIQ patients, who are excited about this new treatment option.

This reception reinforces our view of BELVIQ's significant market potential. Remember that in our clinical trials patients who took BELVIQ experienced statistically significant weight loss as early as the second week of treatment.

On today's call, I'll first provide an update of Eisai's BELVIQ launch activities. And Robert will review our second quarter financial results. Craig will outline our ongoing BELVIQ activities and in the rest of the world and discuss our development programs.

Following our prepared remarks, we'll open the call to your questions. In order to establish BELVIQ's position as an important treatment option for weight management, Eisai is executing on their launch strategy in three key areas. The first is ensuring physician awareness of BELVIQ by providing education on the product's efficacy and safety profile. Second is securing broad reimbursement coverage and third is ensuring patient access and awareness. I will highlight some of the progress that Eisai has shared today.

With regard to physician awareness, Eisai’s initial focus has been to establish a strong foundation for the BELVIQ brand by detailing primary care physicians and endocrinologist and cardiologist who actively treat obesity and can identify appropriate motivated patients who our committed to their long term success.

Since the launch, Eisai’s website metrics show more than a 100,000 unique visits to the healthcare professional’s portion of BELVIQ.com, which includes extensive scientific and medical information for the product.

In addition, Eisai has initiated a national speaker series which features physician thought leaders discussing BELVIQ and it's role in the medical management of obesity. We and Eisai are scheduled feature of BELVIQ at over 20 medical conventions in the remainder of this year including the Obesity Society's Obesity Week in November.

On the reimbursement front, Eisai’s managed markets team has already engaged in access to formulate discussion with the vast majority of major national and regional health plans and pharmacy benefit managers. The company expects that expanded coverage for BELVIQ will occur as health plans and PBMs work through the normal review cycles. We also believe that the American Medical Association’s recent recognition of obesity as a disease will support the reimbursement efforts.

Lastly, to support patient access and awareness, Eisai implemented a 15-day free trial program and a savings card for up to $75 for the purchase price each month for 12 months. So far, approximately 14,000 people have registered for the BELVIQ patient support program, which is designed to help patients to reach their weight loss goals while establishing proper expectations. Eisai plans to call for the introduction of a direct-to-consumer advertising campaign to inform patients about the availability of BELVIQ for chronic weight management when sufficient physician education efforts are completed. The company hasn’t provided additional details as to the timing of this initiative. Executing on this strategy in this brief preliminary period has produced a positive outcome of consistent growth in prescriptions each week since launch, except for the 4th of July holiday week. According to IMS data approximately 12,500 total BELVIQ prescriptions were filled between June 11 and July 19.

We are encouraged by the prescription growth to-date and the initial feedback from physicians and patients. However, it is too early for us to provide meaningful sales guidance. There are simply too many factors that can affect sales. And after six weeks, we do not yet have sufficient visibility to provide an accurate estimate or range. What we have seen so far strengthens our belief that BELVIQ in BELVIQ as an important treatment option for physicians and patients. Robert will now review our financials. Robert?

Robert Hoffman

Thanks, Jack. I will focus my comments and highlights of financial performance for the three months ended June 30, 2013 compared to three months ended June 30, 2012. I also refer you to today’s news release. For the following financial results, 2013 will refer to the three months ended June 30, 2013. And 2012 will refer to three months ended June 30, 2012. For 2013, we reported revenues of $68.9 million compared to $22 million for 2012. 2013 revenues included $65 million in milestone payments from Eisai we have earned in connection with the DEA’s final scheduling designation of BELVIQ, $1.3 million (inaudible) ability to net product sales and a $500,000 milestone payment we have earned in connection Eisai’s filing for regulatory approval of BELVIQ in Canada.

2012 revenues included a $20 million milestone payment from Eisai we earned from inclusion and FDA approved prescribing information of data from the BLOOM-DM trial in patients with Type 2 diabetes. 2013 cost of product sales of BELVIQ totaled approximately $600,000 for 2013. Cost of product sales consists primarily of direct and indirect costs related to manufacturing BELVIQ, including among other costs, salaries, share-based compensation, and other personnel cost concerning depreciation cost and amortization expense, amortization expense related to our manufacturing facility production license. We did not record any cost or product sales of BELVIQ in 2012.

Research and development expenses for 2013 increased $18.8 million from $14.1 million in 2012. The increase is primarily attributable to increases in external, clinical and preclinical studies due to the expenses including manufacturing costs, personnel costs in hiring after FDA approval in June 2012 as well as increases in salaries and existing personnel (inaudible). R&D expenses for 2013 included $1.1 million non-cash share-based compensation expense compared to prior result for 2012.

General and administrative expenses totaled $8.6 million for 2013 compared to $5.2 million for 2012. The increase is primarily attributable to increases in salary and personnel costs, and we will have net auditing fees. G&A expenses for 2013 included $1.3 million in non-cash share-based compensation expense compared to 400,000 in 2012. We recorded a non-cash gain of $2.1 million in 2013 primarily related to revaluation of the common stock warrants that is classified as derivatives liability as well as expiration in June 2013 of warrants purchased 1.5 million shares of common stock at an exercised rate of $8.76 per share. Net income holding to common stockholders was $40.1 million for 2013 or $0.18 per share on fully diluted basis, compared to our net loss of $22.1 million for 2012 or loss of $0.12 per share fully diluted.

Cash and cash equivalent increased to 178.9 million at June 30, 2013, compared to 156.1 million at December 31, 2012. At June 30, 2013 we had approximately 218.2 million shares of common stock outstanding, warrants purchased 2 million shares of common stock with an average exercise price of $4.34 per share, stock options were purchased 14.6 million shares of common stock at an average exercise price of $4.88 per share, research stock unit (ph) for us for 362,000 common stock and performance stock unit wards were 780,000 common stock.

Now let me spend a few minutes discussing revenue recognition that will net product sales as well the growth (inaudible) for the quarter. In accordance with generally accepted accounting principles we recognized net product sales of BELVIQ on the following core criteria on that.

There is a first week of evidence that an existing arrangement in this. Delivery has occurred entitled in the past, the selling price is fixed or discernible and profitability is reasonably assured.

Based on the criteria, we are able to recognize net product sales and Eisai should BELVIQ to their researchers. We recognized net product sales starting at 31.5% of Eisai's net product sales which is calculated by the gross sales price less estimated deductions including certain taxes, credits, allowances, discounts, rebates chargebacks and other items to write Eisai's net product sales in BELVIQ.

The $15 million days is maintaining the current -- Eisai is utilizing our reductions for gross product revenues in our product revenue.

Additionally we reported as revenues costly to it on the BELVIQ product supply using the free trial dose program. Due to the effectiveness of Eisai's patient access program some other it's onetime (inaudible) expenses our growth in net reduction in second quarter was higher than we expect it to be moving forward as larger prescriptions are converted into regular prescription that are either cash or pay utilizing in payment cards or covered under insurance programs.

In addition I had mentioned half-way we expected cost of goods and gross margin particularly to vary significantly into regional capacity at our manufacturing facility in Switzerland. Also this means that the variability is recognized the top business, business related (inaudible) at the time of sale. And normal capacity and assuming a fiscal growth to net reduction, I'd expect our gross margins reflect have on a small model structure (ph).

I hope this additional color is helpful in closing we continue to believe in our finance as an we will plan to finance at this time and look forward to a long-term success in BELVIQ. Craig will now outline our BELVIQ activities in the rest of the world discuss our developments on programs.

Craig Audet

Thanks Robert. Many of you have asked that how we feel at this stage in the ability to launch. The word that comes to my mind for all of us is energize, with our company mission in mind, we are truly energized by the positive feedback we've received from what are a very passionate BELVIQ patients in the U.S.

This drives our commitment to bringing this investment (ph) to other markets worldwide where as data shows the growing problems were obesity and overweight impacted many lives. Our team continues to expand BELVIQ’s geographic footprint through agreements with pharmaceutical companies that demonstrate a combination of local regulatory expertise and proven market strength.

We recently entered into a marketing and supply agreement with CY Biotech for Taiwan. As part of TTY Biopharm a leading Taiwanese pharmaceutical company, CYB was the operating growth that co-marketed the weight loss drug Reductil with Abbott in Taiwan. Based on CYB’s experience, we believe the company is well-positioned to obtain regulatory approval of BELVIQ and successfully commercialize the product in Taiwan.

As we previously outlined, we are working with Eisai and Ildong to navigate the regulatory pathways in the Americas and South Korea. Eisai submitted an application for the approval of BELVIQ in Mexico in March, Canada in June, and plans to submit an application in Brazil around the end of this year. Ildong has made progress and plans to submit an application for approval of BELVIQ in South Korea also around the end of this year.

On the European front, we previously reported our strategic decision to withdraw the BELVIQ application with the European Medicines Agency. We also reported Swiss agency, Swissmedic communicated concerns in its Day 120 questions that were similar to those raised by the EMA. We have now received the preliminary determination from Swissmedic that the concerns have not been completely satisfied by our Day 120 response. We plan to continue regulatory discussions in order to address the Swissmedic’s concerns. With regard to further development of BELVIQ, we have previously discussed our interest in evaluating additional indications and combinations with other agents such as phentermine.

Towards this end, we have just completed dosing in the pharmacokinetic study with co-administration of BELVIQ and phentermine. And we are in the process of analyzing this schedule. Beyond this, Eisai intended to initiate a pilot study to evaluate the safety of co-administration of BELVIQ and phentermine over 12 weeks. Results from these combination studies will serve to inform our options for further BELVIQ and phentermine combination development. Beyond BELVIQ, we remain fully committed to our mission of bringing new and better medicines to patients. We intend to achieve sustained long-term growth by leveraging our validated research and development capabilities to continue to build and advance our pipeline of innovative drug candidates.

Today, I would like to highlight two of these candidates, APD811 and Temanogrel. APD811 is a non-prostacyclin agonist intended for the treatment of pulmonary arterial hypertension. We have completed dosing in a Phase 1 multiple dose clinical trial and expect to announce results in next steps for this program in the coming months. Temanogrel is an inverse agonist with a serotonin 2A receptor intended for the treatment of thrombotic diseases. We are continuing the development of this program through our collaboration with Ildong. Stability of the climates for Temanogrel necessary to begin clinical trials in South Korea have been completed. Ildong expected to initiate a Phase 1 multiple dose clinical trial for Temanogrel around the end of this year.

In summary, we are continuing our efforts to bring BELVIQ to patients in other parts of the world and we remain dedicated to addressing additional unmet medical needs to the development of our novel pipeline candidates.

I will now turn the call back to Jack.

Jack Lief

Thanks, Craig. Before opening the call to your questions, I would like to recognize our team’s innovative efforts to discover and develop BELVIQ. The Galien Foundation has dominated BELVIQ for the 2013 pre-Galien USA award in the best pharmaceutical patient categories. This award recognizes outstanding achievements in improving the human condition through the development of innovative therapies, and it is one of the biomedical industry’s top accolades. We thank and congratulate our scientists and development team for their commitment to innovation.

In closing, we look forward to the continued growth of BELVIQ prescriptions and to delivering additional novel medicines to address the unmet medical needs of patients. Kevin?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Cory Kasimov from JPMorgan.

Matt Lowe - JPMorgan

Hi there. It’s actually Matt Lowe in for Cory today. Just wondering to start with who have been the primary prescribers of BELVIQ early in the launch, have there been mainly obesity specialists or have you seen any early primary care use? And then the other question was just has there been any inventory stocking of BELVIQ so far, and if so to what extent? Thank you.

Jack Lief

Sure. So, there are many more primary care physicians in practice. So, it’s no surprise that primary care accounts for the majority of sales thus far, prescriptions thus far. However other specialties such endocrinologists and cardiologists are also visible according to the information we have. In terms of stocking, as we’ve announced earlier, Eisai put 20,000 pharmacies had product by June 11. So they have stock I believe much of that stock has already been sold and the wholesalers and distributors also have some stock associated with that situation Robert, do you want?

Robert Hoffman

Yeah Eisai didn’t report the number likewise last night in the earnings call that they had gross revenue of $10 million and if you kind of do the simple math of that price is roughly $200 of 50,000 bottles which is into the distributor at which point we recognize revenue.

Matt Lowe - JPMorgan

Okay, that's great. And then just as a quick follow up the 12 week combination study with phentermine. I guess what kind of regulatory feedback do you have on the trial design there and will you conduct that dose in that study?

Jack Lief

The Eisai hasn’t really announced the study for that 12 week study, it's early not a delivery of the time but at this point but we can give you more insight into that once they initiate that study.

Operator

Our next question comes from Marko Kozul with Leerink Swann.

Eileen McIntyre - Leerink Swann

Thanks for taking the question. This is Eileen in for Marko. You indicated that IMS tracked 12 as in 500 scripts between June 11 to July 19. How accurate is this comparing to what you have been shipping or selling into the channel?

Jack Lief

Well keep in mind that IMS is only an estimate. We think that they track 75% of the national prescription data and estimate the rest based on that 75% figure. So it's really hard to tell how exactly accurate. I think the most important factor is the consistency of the growth of BELVIQ prescriptions week-over-week was shown really excellent growth as I said except for the holiday week of July 4th. So we're encouraged that this is going to continue.

Eileen McIntyre - Leerink Swann

Great, just one follow up. So Eisai has around 50 plus reimbursement specialists and healthcare economists behind BELVIQ, are they focusing on PBM and insurance where glycemia has already had success or are they going after entities that do not currently reimburse for these obesity drugs? Also should we expect meaningful progress on the reimbursement front in the second half of the year and are there any revised updates on the broader coverage calls.

Jack Lief

Yeah so they've said that they're broadly covering the healthcare providers, the PBMs and on their conference call they've also said that they're bullish on being able to improve the reimbursement firmly approximately 30% looking at possibly as much as 50% by the end of their first fiscal year which ends end of March next year.

Eileen McIntyre - Leerink Swann

Just one last question on the combo trial is there any timeline that you expect to initiate the pilot study?

Craig Audet

Eisai is targeting sometime around end of year beginning of next year to get that under way.

Operator

Our next question comes from Lee Kalowski with Credit Suisse.

Lee Kalowski - Credit Suisse

I guess first in citing the IMS data I guess there is at least some sort of endorsement that led the data that was reasonably accurate that is worthwhile of tracking that going forward. Is that fair and I guess it's both you and Eisai are citing IMS data. Any reason to cite this instead of Symphony?

Jack Lief

I think Eisai has cited both IMS as well as Symphony data. I think in the U.S., IMS is very known but we are happy to go with either, and I think both providers provide consistent increases in our prescriptions.

Lee Kalowski - Credit Suisse

Okay, fair enough. Then one question on cost of goods sold, so presumably going forward some amount of costs will be recognized, which essentially means that the net royalty rate is not effectively the 31.5%, it would be that minus whatever the cost of goods sold are, is that correct?

Jack Lief

That’s correct.

Lee Kalowski - Credit Suisse

Okay.

Jack Lief

But it’s not a royalty it’s a transfer price too.

Robert Hoffman

And so we sell the product data and then we have manufacturing costs (inaudible) from that, but as I mentioned in my prepared remarks, we don’t have full capacity in our facility yet. So, once we get up and going that full capacity that amount of cost of goods is going to come down significantly.

Jack Lief

As a percentage of sales.

Lee Kalowski - Credit Suisse

Okay, that’s helpful. Thanks. And as far as the cash received from Eisai, so I guess late last year if my memory is correct you received I think it was close to $12 million or so, which by my math would basically cover $37 million or so of net sales. I am wondering if that sounds about right, and if I guess we think about that if I look at where operating expenses are give or take $27 million, it seems like does that give – do you feel that, that gives you enough of a cushion to get to the $37 million, I guess will be my question?

Jack Lief

So, clearly, Eisai has some inventory on hand, but because prescriptions are increasing each weak, we think that there will be manufacturing consistently more product to supply side.

Lee Kalowski - Credit Suisse

I mean, I guess what I was asking is that given that you had – so you had supplied them with products late last year, which sort of you recognized if there was $4 million in product, in net sales that was recognized of which you received the royalty rate on it, that would still leave by my math I don’t know about $33 million in sales would have to be achieved before you would receive another cash infusion from Eisai. Is that sort of what I was wondering is if we feel like there is enough runway before your next cash infusion from them?

Robert Hoffman

They are comparable. We are manufacturing over there now and they are ordering supply and in accordance with the production forecast. So, we will continue to supply them with flexibility going forward.

Lee Kalowski - Credit Suisse

Okay.

Jack Lief

Yes, we are comfortable with our cash position also right now. And I look forward to eventually becoming profitable.

Robert Hoffman

Yes, and I heard current expenditure guidance on R&D is $70 million to $78 million for R&D, which includes some $7 million of non-cash expenses, $28 million to $34 million in Eisai, which includes $6 million in non-cash. So, it’s very manageable. We were very comfortable.

Lee Kalowski - Credit Suisse

Okay, thanks.

Operator

Our next question comes from Ted Tenthoff with Piper Jaffray.

Ted Tenthoff - Piper Jaffray

Thank you. Can you guys hear me okay?

Jack Lief

Yes, Ted.

Ted Tenthoff - Piper Jaffray

Excellent. So, I appreciate you guys are taking time to answer all these questions. It’s giving us a little bit more color here. My question today was sort of more the I guess qualitative interaction that you guys are having and what you can tell us about Eisai’s experience with docs and potential prescribers you said that there was something like 100,000 website hits? Did you mention how many actual doc visits there have been? And can you give us just a little bit more color on what the feedback that Eisai is getting to get before docs begin prescribing more.

Jack Lief

Sure. So Eisai has stated that approximately 3,900 physicians have already started prescribing BELIVIQ and so that's a good thing. They've covered the majority of their initial target number of physicians of that 20,000 to 30,000 physicians that they have initially identified high prescribers. So that's also a good thing. It will take a while for everybody to start prescribing BELVIQ obviously. So they are committed to doing the best job that they can and obviously once they finish, they are satisfied, their physicians explain the features and benefits of BELVIQ along with the side effect profiles and risks they will start direct-to-consumer advertise, Craig?

Craig Audet

And Ted I'd like to add to that. Earlier today as I talked a little bit about the responded data that was presented at the ADA in June and we’re hearing a lot of excitement from physicians from that presentation in June. I am not too familiar with it but basically it showed approximately 10% weight loss at week 52 across the board for patients when they responded to that week 12 and we saw a ratio of 2% to 3% more I am sorry, 2 to 3 times, more patients who responded meet that 5% weight loss at week 52 or placebo. So it's pretty exciting and the diabetes itself, so patients with diabetes works really nice as well. We talked about a 1.2% reduction in HD1C.

Ted Tenthoff - Piper Jaffray

All right, excellent. And then I guess one last question just to sort of follow-up on that. Have you gotten a sense of sort of pent up demand, like in other areas obviously docs have been meeting with patients for a long time, know their patients well and may have 10 to 15 patients or whatever that they intend to put on a weight loss drug right away. Have you gotten a sense you know about what those levels may be or is that something that Eisai is looking at and trying to understand?

Craig Audet

Well I can tell you that we do get occasional context from physicians at Arena asking if we can get an Eisai rep to come and visit them to explain the product, the new product because their patients are asking about it and so we pass those along to Eisai. So I think we're getting very, very good traction especially among the key opinion leaders. There are number of key opinion leaders that are putting a large numbers of their patients on BELVIQ. So I think that's also a good sign. So but as we said earlier it's early in the process, it's only been six weeks, so we'll have to wait as this unfolds.

Operator

Our next question comes from Alan Carr with Needham & Company.

Alan Carr - Needham & Company

Wondering if you could tell us a bit more about your actions with the FDA around testing BELVIQ with phentermine. I know you've started this 12 week trial but can you give us any better sense of what the response was here and what they might ultimately want for approval in combination? And then also you mentioned gross to net earlier being, that there was a room for improvement there. I was wondering if you can give us some timing as to when you might expect that to occur. Thanks.

Jack Lief

Sure. I'm going to let Craig talk about the FDA but before I do let me just address the gross to net room for improvement. This is expected in the past sampling was very heavy at launch times with the voucher that’s very similar to sampling. And it gives patients the opportunity to see what the effectiveness is of BELVIQ and make sure that they are satisfied with the product on a trial basis just like with samples. And so we are really happy with how that sampling is going. Having said that, we expect that more and more refills will be coming out, which will reduce the overall rate of sampling, the proportion of sampling to the total prescriptions. Robert, do you have?

Robert Hoffman

I would just say that in the sort of you give the calculation equated to net product sales probably of about $4 million to 60% growth in that deduction for the second quarter for Arena. We are still getting three weeks.

Craig Audet

Yes, that, that include some one-time deductions related to the launch and Jack had more with the equation to regular prescription, we will see that number to the 60% decrease.

Alan Carr - Needham & Company

These one-time deductions, that’s something they won’t appear in third quarter. And is that a meaningful contributor in this first quarter here or this first launch quarter?

Craig Audet

Yes, yes, certainly. And in fact, I guess, it is more meaningful that the more options that they give out, the more people are trying the drug and we get more conversion hopefully into product prescriptions.

Alan Carr - Needham & Company

Okay, thanks. That’s helpful. And then around sort of the FDA?

Craig Audet

Hi Al, it’s Crag. We had that meeting with the FDA recently. We believe it was very positive it was very a great dialog back and forth. I certainly don’t want to put words into mouth with that yet, but based on those discussions that took place, the FDA appears to be very amenable to BELVIQ, phentermine to fix dose combination at this point. So, we are starting with these two studies as I said in my prepared remarks to inform the options for further development down the road.

Alan Carr - Needham & Company

Okay. So, would you have another round of meetings with the FDA after these trials are completed? And then since Eisai is conducting it, are they covering all the cost here and my recollection was that you all didn’t have a formal, I guess, arrangement as to how the cost of this would be split between the two of you?

Craig Audet

Right. And so depending on the results of those studies and where we are at and what we decide to do or what we want to do going forward, we certainly have the option of going back and having further discussions with the FDA on that. In terms of the cost related to the studies, we have agreed with Eisai that we will cover the cost of the PK study, they will cover the cost of the 12-week study.

Jack Lief

Going forward, finished the PK study, the pharmacokinetic study.

Alan Carr - Needham & Company

Thanks very much.

Operator

Our next question comes from Steve Brown with Bank of America.

Steve Brown - Bank of America

I have a couple of questions for Robert and perhaps you just said in your prepared remarks that I had a really hard time hearing you. How do you differentiate on the treatment from Eisai that for drug that is eventually a free drug versus a paid script how do you differentiate that in your revenue recognition?

Robert Hoffman

It’s included, but in this quarter there was a small amount, so that’s why I cannot mapped out that 1.3 equates to about $4 million in BELVIQ sales for the quarter in that part of sales.

Steve Brown - Bank of America

And can you parse out of that shipment data how much of it was end user consumption versus channel build?

Robert Hoffman

Well, I think if you do the map, as Cindy said, it is roughly 12,500 prescriptions have been sold today with the number and we shipped to Eisai, take that out Eisai shipped it, certainly, there is roughly 50,000 bottles in the quarter just doing the simple math.

Robert Hoffman

Keep in mind that the quarter was only 3 weeks’ worth of actual. So, the next quarter will be quite different shall we say.

Steve Brown - Bank of America

Okay. And one for Dominic and that is any preclinical data that you the combination of a faster and incentive (inaudible)?

Dominic Behan

Yeah with our previously generated data in combination and that was subject of a filed patent. So we just look intrude into the facts and showed some increases in combination.

Jack Lief

Was that your question Steve?

Steve Brown - Bank of America

It is the question, yes, roughly what type of a weight loss change in the mouse model did you see by combining both reagents together?

Jack Lief

There was an increase, but of course it's preclinical data and ultimately we're interested in the human data and that's going to be the subject of the study that creates this and that's where our focus will be.

Robert Hoffman

Yeah humans could be different than the preclinical experience. So we will know once that 12 week study is completed.

Operator

Our next question comes from Jason Butler with JMP Securities.

Jason Butler - JMP Securities

Just thinking about the PK trial with lorcaserin and phentermine can you talk about the specific dose or doses you're looking at in this program right now? And if you can't be specific could you may be characterize in the higher dose, as we typically associate with monotherapy or whether you would characterize these as low doses of phentermine.

Jack Lief

Sure, Jason we looked at single doses of lorcaserin, 10 milligrams, phentermine 15 milligrams and then a combination of the 10 milligrams of lorcaserin plus 15 milligrams of phentermine. And then each individual, in each individual dose the PK and the combo to understand the (inaudible) interaction.

Jason Butler - JMP Securities

And is this the same dose that you were studying in the pilot study?

Jack Lief

Eisai hasn't probably enough of the details of that study as we said, we can give you more color on that when they initiate that.

Jason Butler - JMP Securities

Okay. And then just on the cost of program after the pilot study is completed is there a fixed agreement on who pays for what or is that still should be determined?

Jack Lief

Yeah. So we paid for the pharmacokinetics study and Eisai will pay for the pilot study the 12 week study.

Robert Hoffman

But the agreement is still under discussion.

Operator

I am not showing any further question at this time. I'd like to turn the conference back to our host for closing remarks.

Cindy McGee

Great. Thanks Kevin. Thank you all for joining us today. We look forward to meeting with many of you at the upcoming investor and medical conferences. Have a great day.

Operator

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

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