Arena Pharmaceuticals' CEO Discusses Q3 2013 Results - Earnings Call Transcript

Nov. 9.13 | About: Arena Pharmaceuticals, (ARNA)

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)

Q3 2013 Earnings Conference Call

November 8, 2013 08:30 AM ET

Executives

Jack Lief - Co-Founder, Chairman, President and CEO

Craig Audet - SVP, Operations and Head of Global Regulatory Affairs

Robert Hoffman - SVP, Finance and CFO

William Shanahan, Jr. - SVP and Chief Medical Officer

Dominic Behan - Chief Scientific Officer

Cindy McGee - VP of Investor Relations and Alliance Management

Analysts

Matthew Lowe - JP Morgan

Edward Tenthoff - Piper Jaffray & Co.

Alan Carr - Needham & Company

Marko Kozul - Leerink Swann

Steve Byrne - Bank of America Merrill Lynch

Thomas Wei - Jefferies & Company

Scott Marx - Samlyn Capital LLC

Operator

Good morning everyone and welcome to Arena Pharmaceuticals Corporate Update and Third Quarter 2013 Financial Results Call. This call is being recorded. At this time for opening remarks and introductions, I’d like to 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 for joining us this morning. We’re pleased to discuss our expanded marketing and supply agreement with Eisai as well as provide a corporate and financial update. We hope that you have a chance to review the two news releases across the wire yesterday along with our 8-K filing that crossed this morning.

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

During this broadcast, we’ll 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 regards to efficacy, safety, R&D, advancement, potential, regulatory applications and collaborations, 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’re cautioned to not place undue reliance on these forward-looking statements, which represent our judgment and beliefs only as of the time they’re 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’ll now turn the call over to Jack.

Jack Lief

Good morning and thank you for joining us today. We are excited to begin today’s call with a review of our amended collaborations with Eisai. The marketing and supply agreement for BELIVIQ, which previously provided Eisai with exclusive commercialization rights for most of the Americas, has now been expanded to include most countries worldwide.

Our excitement stems from the fact that we and Eisai share similar values with a focus on addressing significant health challenges. Eisai is an established marketing organization that has experience creating access to new treatment options for patients and physicians. Importantly, BELVIQ is a key opportunity and the key priority for Eisai’s global organization and we’re confident in Eisai’s commitment to the long-term success of BELVIQ.

Our collaboration creates the foundation to make BELVIQ available to physicians and patients worldwide for weight management. In addition, it creates a powerful platform to deliver this novel compound for new indications by leveraging our combined drug development and regulatory expertise. Under the terms of this agreement, we’ll receive from Eisai an upfront payment of $60 million and in addition we’re eligible to receive up to a total of $176.5 million in regulatory and development milestone payment.

We are also eligible to receive a total of $1.56 billion in one-time purchase price adjustment payments based on sales in the territories covered by the agreement. We will continue to manufacture and sell BELVIQ from our facility in Switzerland for a percentage of Eisai’s net sales. Together with Eisai, we plan to pursue certain investigational programs for BELVIQ, such as a fixed dose combination with phentermine, a once daily formulation, smoking cessation as well as explore BELVIQ’s impact on diabetes and cardiovascular outcomes.

We are pleased to be working with Eisai to bring BELVIQ to patients in additional parts of the world. With regard to our third quarter, results reflect only the first four quarters since BELVIQ became available in the U.S. pharmacies. Additional work is needed to continue building the weight management market in BELVIQ’s sale.

We are pleased with Eisai's commitment to realizing the medical and commercial potential of BELVIQ and look forward to the market growth of this important treatment option as we move into 2014.

On today’s call, Craig will provide an update on Eisai’s U.S. launch activities, discuss the ongoing efforts to expand the availability of BELVIQ to other countries and outline our development programs. Robert will then review our third quarter financial results and I’ll complete our prepared remarks before opening the call to your questions.

I’ll now turn the call over to Craig.

Craig Audet

Thanks, Jack. Eisai has focused its launch strategy on three key areas; broadening awareness among healthcare professionals, expanding reimbursement coverage and developing patient support programs and awareness. To date Eisai has reported progress with each of these pillars. Specifically with regard to physician awareness, Eisai has reported that more than 10,000 physicians have prescribed BELVIQ to date and more than 1,000 have been engaged through speaker programs, product theaters, webcasts and regional meetings. Traffic to the enhanced physician website BELVIQhcp.com remains high.

We are pleased that Eisai is now doubling the size of its sales force to approximately 400 representatives across the country, which will increase their reach to 65,000 physicians by the end of the year. The expansion of the sales force follows progress on the reimbursement front. Since launch, major payers have agreed to cover BELVIQ including the largest pharmacy benefit manager in the country, Express Scripts and Medco, as well as multiple Blue Cross Blue Shield plans.

In addition, Eisai as managed markets team continues to focus on this effort and expect that by January additional plans will be in a position to cover BELVIQ as we move into the 2014 calendar year. Going on the physician education and the reimbursement efforts, Eisai has now launched patient awareness and support campaigns. Print advertisements are running in major U.S magazines that include a 15 day free trial voucher for BELVIQ. These ads highlight that patients were able to lose weight as well as improve certain health risk factors.

Lastly, Eisai’s Believe Everyday Support program provides comprehensive diet and exercise support and savings for patients treated with BELVIQ. Through this strategic multi-pronged approach, Eisai has made progress in establishing a strong foundation for the long-term success of BELVIQ. As Eisai increases the BELVIQ sales force, expands reimbursement coverage and executes on their DTC campaign, we believe that BELVIQ is well positioned for steady growth as we move into the New Year.

Beyond the U.S., we’re committed to bringing BELVIQ to other markets worldwide where as the data show, the growing problems of obesity and overweight impact the lives of many. Eisai submitted an application for the approval of BELVIQ in Mexico in March, for Canada in June and plans to submit an application in Brazil around the end of this year. We look forward to updating you as our registration strategies in the rest of the world evolve based on our newly expanded agreement.

Regarding our additional collaborations, Ildong has completed a study to evaluate the tolerability and pharmacokinetics of BELVIQ in Korean adults and is planning to submit an application for approval in South Korea around the end of this year. In addition, CYB is developing its regulatory submission for BELVIQ in Taiwan and will likely also be in a position to submit their application for approval around the end of this year. Our interactions with Swissmedic continue as we pursue regulatory approval of BELVIQ in Switzerland. We will keep you updated on this process as appropriate.

As mentioned, our expanded agreement with Eisai creates a powerful platform to further evaluate the potential of this new chemical entity. Together we’re focused on developing a fixed dose combination with phentermine, a once daily formulation, a treatment for smoking cessation as well as exploring the drug impact on diabetes and cardiovascular outcomes.

With regard to the combination, in order to enable Eisai’s pilot study we’ve completed a small pharmacokinetic study of single doses of lorcaserin 10 milligrams and phentermine 15 milligrams when administered in combination. Eisai now plans to initiate a double blind randomized parallel group pilot study of 12 weeks’ duration around the end of this year. This study is designed to enroll approximately 225 patients to evaluate the short-term safety and tolerability of lorcaserin 10 milligrams twice daily by itself and when administered in combination with phentermine 15 milligrams once daily and phentermine 15 milligrams twice daily.

Please note that our FDA approved prescribing information currently states that the safety and efficacy of co-administration with other products for weight loss have not been established. We’ve also prioritized the development of a once daily formulation of lorcaserin. In September we initiated a study to evaluate the safety, tolerability and pharmacokinetic properties of several different formulations of lorcaserin 20 milligram extended release tablets in order to select one for further development.

In addition, we’re pursuing a development plan to evaluate lorcaserin for smoking cessation. We believe that based on its mechanism of action lorcaserin could be efficacious for this indication. Our belief is supported by preclinical studies independently conducted at two major academic centers. We believe that there is a significant opportunity in the U.S. and beyond particularly in Asia and Europe. And plan to initiative a Phase 2 clinical trial in the first half of next year.

Beyond our global BELVIQ efforts and lorcaserin development, we remain committed to our mission of bringing new and better medicines to patients. We look forward to strategically advancing our pipeline of novel drug candidates, which include for example APD811, a non-prostanoid prostacyclin agonist intended for the treatment of pulmonary arterial hypertension which has completed Phase 1. We plan to initiate the phase program -- of the Phase 2 program next year. Another example is Temanogrel, an inverse agonist of the serotonin 2A receptor intended for the treatment of thrombotic diseases.

Ildong is on track to initiate a Phase 1 multiple dose clinical trial to evaluate the safety of co-administration with Aspirin and clopidogrel. Ildong will fund this trial and plans to initiate around the end of this year.

Our pipeline also includes APD334, an S1P1 receptor agonist for the treatment of a number of conditions related to auto immune diseases as well as APD371, an agonist of the cannabinoid 2C -- I’m sorry, an agonist of the cannabinoid 2 receptor intended for the treatment of pain. We plan to update you on the timing of advancing these candidates in the coming months.

In summary, Eisai continues to deliver on its long-term strategy to increase awareness and access for BELVIQ. Individually and through collaborators we continue to advance our regulatory applications in territories outside of the United States. Our expanded agreement with Eisai provides us with significant additional resources to commercialize BELVIQ globally and pursue lifecycle management activities. Lastly, we remain excited about the potential of the novel drug candidates in our pipelines.

I’d now like to hand the call over to Robert, who will review our financials.

Robert Hoffman

Thanks, Craig. I will focus my comments and highlight the financial performance for the three months ended September 30, 2013 compared to the three months ended September 30, 2012. I also refer you to yesterday’s news release. For the fine financial results 2013 will refer to the three months ended September 30, 2013 and 2012 will refer to three months ended September 30, 2012.

For 2013, we recorded revenues of $3.6 million compared to $1.5 million for 2012. 2013 revenues included an aggregate of $2 million for BELVIQ. This includes 31.5% or $1.7 million of Eisai’s $5.4 million in net sales under our agreement, and $300,000 related to redemptions of the 15 day free trial voucher.

Arena and Eisai currently recognized net product sales revenue when Eisai shipped product to its wholesalers. In the third quarter of 2013, Eisai shipped over 41,000 bottles of BELVIQ. Cost of product sales of BELVIQ totaled $460,000 for 2013. We did not record any cost of product sales of BELVIQ in 2012.

Research and development expenses for 2013 increased to $14.6 million from $11.6 million for 2012. The increase is primarily attributable to increases in external clinical and preclinical study fees and expenses including manufacturing costs, personnel costs and lab supply expenses. R&D expenses for 2013 include a $1.2 million in non-cash share-based compensation expense compared to $500,000 for 2012.

General and administrative expenses totaled $7.8 million for 2013 compared to $7.4 million for 2012. G&A expenses for 2013 include a $1.1 million in non-cash share-based compensation expense compared to $800,000 for 2012. We recorded a non-cash gain of $4.1 million in 2013, primarily related to the revaluation of a common stock warrant that is classified as a derivative liability.

Net loss allocable to common stockholders was $17.2 million for 2013 or $0.08 per share on a fully diluted basis compared to a net loss of $15.5 million for 2012 or a loss of $0.07 per share fully diluted. Cash and cash equivalents increased to $180.7 million at September 30, 2013 compared to $156.1 million at December 31, 2012. Cash at September 30th does not include the $60 million upfront payment we will receive from Eisai in conjunction with the expanded agreement.

Now let me spend a few minutes discussing the difference between our receipt of cash and our revenue recognition of U.S. BELVIQ net product sales, as well as the growth to net deductions for the quarter. We received cash and we deliver finished product to Eisai in accordance with generally accepted accounting principles, we are able to recognize net product sales when Eisai shipped BELVIQ to their wholesalers.

We recognized net product sales starting at 31.5% of Eisai’s net product sales, which is defined in our agreement as growth sales price less estimated deductions including certain taxes, credits, allowance discounts, rebates, charge backs and other items. The 15 day vouchers and the savings card Eisai is utilizing are deductions from gross product revenue to net product revenue.

Additionally, we receive and recorded net product revenue cost of goods on the BELVIQ product supply used in the free trial voucher program. Due to the effectiveness of Eisai’s patient access program and some one-time launch expenses, our gross to net deduction of 49% from June through September was higher than we expected to be moving forward as our prescriptions convert into regular prescriptions.

In addition, as I mentioned in the past, we expect the cost of goods and gross margin for BELVIQ to vary significantly and to reach normal capacity at our manufacturing facility in Switzerland. Also contributing to the variability is recognizing the cost of goods related to vouchers as revenue at the time of sales. In normal capacity and assuming the typical gross to net deduction, I’d expect our gross margin to reflect that of other small molecule drugs.

In summary, we continue to believe we’re well financed, have no plans to finance at this time and look forward to long-term success of BELVIQ.

I’ll now turn the call back over to Jack.

Jack Lief

Thanks, Robert. As we have outlined, our pipeline has many development opportunities and it’s important to note we’ll manage expenses related to advancing these programs in light of BELVIQ revenues and shared cost with collaborators. Regarding the BELVIQ launch there remains significant potential for the chronic weight management market. We believe that BELVIQ represents the much needed innovation in pharmacotherapy to drive the discussion between physicians and patients forward.

As mentioned previously, we recognize there is much work to be done. However, we are encouraged by compelling patient success stories, payers’ interest in covering BELVIQ and Eisai’s growing investment in the DTC campaign and sales force. We believe we’re well positioned for prescription growth as we move into 2014.

With a focus on continued physician education, BELVIQ will be featured at next week’s Obesity Week, in Atlanta. Five abstracts of new data analyses from our Phase 3 clinical trial program will be presented by key opinion leaders and Eisai sponsoring a BELVIQ product leader in Symposium.

BELVIQ data will also be presented at the American Heart Association Scientific Sessions, in Dallas later this month. In addition, we’re scheduled to present at the upcoming investor conferences including the Piper Jaffray Healthcare Conference in December and the JP Morgan Healthcare Conference in January. In closing, we remain energized by our internal collaborative and global efforts to improve life through the discovery and development of innovative medicines.

We will now open the call to your questions. Sayid?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And our first question comes from Cory Kasimov from JP Morgan.

Matthew Lowe - JP Morgan

Hi there. It’s actually Matt Lowe in for Cory today. I was just wondering what percentage of the scripts in 3Q were due to the free sampling vouchers? I believe it was around 60% in 2Q. And then if you could give us any details on what the conversion rate is of patients with the vouchers to regular scripts? Thank you.

Robert Hoffman

Hey Matt this is Robert. It's roughly the same in terms of the percentage of voucher utilization. And then in terms of conversion, we are anxiously looking forward to that data which is not available yet.

Matthew Lowe - JP Morgan

Okay. And then just as a quick follow-up on the reimbursement status, could you comment on the percentage of covered lives you are at right now? Thanks.

Robert Hoffman

So Eisai has mentioned that they are at 40% right now and their goal was to be 50% by the end of their fiscal year, which ends at the end of March of 2014.

Matthew Lowe - JP Morgan

Okay. That’s great. Thank you very much.

Operator

Thank you. And our next question comes from Ted Tenthoff from Piper Jaffray.

Edward Tenthoff - Piper Jaffray & Co.

Thank you very much for the update and congrats on the progress posted on the script side and also with the Eisai expansion. I think you touched on this a little bit in the call, but can you go into some more detail about how the global -- largely global alliance came into place and just sort of revisit what the advantages are of having a single source supplier or distribution partner globally?

Jack Lief

Sure. So I’ll start the answer to the question and Craig might add some color also on this. But we had a numerous inquiries and discussions with a variety of other partners -- potential partners, regional partners for BELVIQ. And as we got into these discussions it appeared to us that strategically from a long-term perspective we wanted to have Eisai as our global partner.

So Eisai stepped up and we were able to conclude an important -- this important agreement. In this agreement we’ve significant – we’ve created significant opportunity for expanding the indications that BELVIQ is promoted for. So right now it’s for chronic weight management. But clearly we believe that there are other opportunities, in addition to chronic weight management that patients could benefit from and now we’ve a plan, a clear path forward so that we can take advantage of some of these other opportunities. Craig, do you have?

Craig Audet

Just to add that Eisai their operations cover about 80% of the global pharmaceutical market. They’ve got about 10,000 employees worldwide. Their R&D capabilities go back to the 1930s. So these guys have been around for while. They know how to get things done. In Europe alone, they have a portfolio of over 10 products and it includes Aricept, AcipHex, Halaven, they’re looking at building a business unit in Europe around BELVIQ.

So we see them as quite capable of taking this product global and we see a lot of synergies between the two companies. So between the two of us we can leverage the expertise that we’ve both in drug development, both in regulatory. Another example is both Pfizer and AbbVie selected Eisai to promote Lyrica and Humira in Japan. So it’s not just us, these guys have partnerships with the biggies as well.

Edward Tenthoff - Piper Jaffray & Co.

Excellent. And I apologize, I’ve multiple calls going on this morning. But did you give an update on what plans would be for you and Eisai to resubmit and seek European approval?

Craig Audet

Yes. So Eisai as you can imagine is very interested and excited about launching in Europe. So we’ve -- as a matter of fact have a meeting with them next week to sort of set that regulatory strategy in Europe that we’ve been discussing with them for a while in stone and get it moving. And as soon as we get that solidified, we look forward to updating you on that strategy.

Edward Tenthoff - Piper Jaffray & Co.

Awesome, Craig. Thanks, Jack.

Operator

Thank you. And our next question comes from Alan Carr from Needham & Company.

Alan Carr - Needham & Company

Hi. Thanks for taking my questions. Can you comment a bit on where things stand with the cardiovascular outcomes trial? How that might fit into the European path and then outside North and South America there is territories that you are picking up. Can you discuss where you think the biggest commercial opportunities might be? Thanks.

Jack Lief

Well, let me take the last part of your question first. The commercial opportunities are clear in Japan, China and eventually in the EU. And we believe that Eisai certainly has the capability of materially moving the opportunity forward in all of those markets. I will let Bill talk about the cardiovascular outcome study.

William Shanahan, Jr.

The cardiovascular outcome trial will be an international trial with substantial numbers of patients over up to five or six years. And we’ll of course focus on ruling out harm, but the trial will also have the opportunity to look at benefit for cardiovascular outcomes and we hope to begin this trial around the end of this year and we will update you when we’ve got a final -- all the final plans down.

Alan Carr - Needham & Company

What sort of work is going to be needed for Japan and what’s your thoughts on timing to do that development?

Jack Lief

Craig?

Craig Audet

Good morning Alan. So Japan is one of the countries that takes a little bit longer to get the registration done. We are -- as with Europe, we are looking at that strategy currently that Eisai and we will as soon as we get that one nailed down, we will update you on that as well.

Alan Carr - Needham & Company

Okay. Thanks very much.

Operator

Thank you. And our next question comes from Marko Kozul from Leerink Swann.

Marko Kozul - Leerink Swann

Hey, good morning. Congrats on your progress and the expanded partnership. Two quick questions. One on the reimbursement front, can you comment about any Tier 2 coverage or the proportion of Tier 3, Tier 2 that you see evolving? And second you made some comments about the pilot combination study. Could you talk a little bit more about what you’ve seen and what came out of that study? Thanks.

Jack Lief

Sure. Let me just mention as far as Tier 2 or Tier 3 since Eisai is primarily responsible for the commercialization as well as the reimbursement, I don’t really have that information handy to present to you on that. And the second part of your question was the combo, you want to Bill -- you want to direct that?

William Shanahan, Jr.

Sure. We did the preliminary pharmacokinetic interaction study and a small study just to make sure that there are no apparent major interactions between the two drugs both pharmacokinetically or from a safety standpoint. And we basically found the profile we expected and are progressing on now to the Eisai study.

Marko Kozul - Leerink Swann

Terrific. And maybe just a quick follow-up on inventory. Can you comment about where you expect the inventory level to be moving forward? Thanks.

Robert Hoffman

Yes, I’d expect, this is Robert. I’d expect it to moderate down to two to four weeks. Right now we’re running higher than that. So it just depends on what two to four weeks looks like, if sales continue to increase, that -- the number will look better, but I’d expect two to four weeks in the channel.

Marko Kozul - Leerink Swann

Terrific. Thanks for taking the questions.

Operator

Thank you. And our next question comes from Steve Byrne from Bank of America.

Steve Byrne - Bank of America Merrill Lynch

Robert can you just talk a little bit more about the shipments in the quarter? This 41,000 bottles that were shipped to Eisai’s wholesalers did that include the 15 day free drug bottles?

Robert Hoffman

So 41,000 is bottles that they get split up, so a voucher is 15 days which is 30 pills and a bottle is 60 pills. So the answer is yes.

Steve Byrne - Bank of America Merrill Lynch

Okay. And so the $5.4 million that’s Eisai’s estimate of what portion in the -- of end user sales actually occurred and -- so the gross to net is an adjustment based on what was shipped versus what they think was the end market sales including discount?

Robert Hoffman

So the $5.4 million is the amount that was shipped to the wholesalers.

Steve Byrne - Bank of America Merrill Lynch

Net sales?

Robert Hoffman

Yes, net sales.

Steve Byrne - Bank of America Merrill Lynch

Net sales less discounts, though? I mean it incorporates discounts to the end user, right?

Robert Hoffman

That’s after discount. So that’s $5.4 million after discounts.

Steve Byrne - Bank of America Merrill Lynch

Okay. So that does -- it does incorporate Eisai’s estimates of end user discounts?

Robert Hoffman

Correct. So there is a growth number and then you get to the net number which is $5.4 million of which we get 31.5% of that or $1.7 million for the quarter.

Steve Byrne - Bank of America Merrill Lynch

Okay. All right. And then the $300,000 that you get on the free drug is that cost plus or is that just straight COGS?

Robert Hoffman

Its straight COGS.

Steve Byrne - Bank of America Merrill Lynch

Okay. And the …

Robert Hoffman

And just to be clear, that will fluctuate over time as I mentioned, cost of goods depending on the batches, it will fluctuate.

Steve Byrne - Bank of America Merrill Lynch

Okay. All right. Thanks. The 20 mg QD extended release formulation, is that I different formulation than you used in your earlier trials where you were comparing 10 mgs BID versus 20 mgs QD?

Jack Lief

Yes, it is. It’s an extended release formulation that will allow for once a day usage.

Steve Byrne - Bank of America Merrill Lynch

And just remind me back then was the problem with the 20 mg QD, you had some adverse effects because of some peak serum concentrations?

Jack Lief

Yes. So we’ve been evaluating BELVIQ in clinical trials in the past as an immediate release compound. So the compound goes into the blood quite quickly. I believe in 90 minutes there is a maximum concentration and then it’s gradually cleared over 11 hour half life. So the extended release will be absorbed quite slowly and allow for once a day dosing.

Steve Byrne - Bank of America Merrill Lynch

Okay, very good. Thank you.

Operator

Thank you. And our next question comes from Thomas Wei from Jefferies.

Thomas Wei - Jefferies & Company

Thanks. I had wanted to just follow-up -- actually just following up on Steve’s last question and then one on the combination study. The 20 milligram extended release formulation, I guess, I don’t remember why is it that you had never pursued that earlier? I guess, it seems like a logical thing to have taken a twice daily drug and tried to develop an extended release formulation right from the get go. Were there attempts to do that or were there technical challenges in creating an extended release? I just wanted to understand a little bit of the history there.

And then my second question was just on the combination study. I think I might have missed this, but in the 225 patients in the combo study that Eisai is going to initiate are they just combination arms or is there a positive control with one or both of the individual drugs as monotherapy? Thanks.

Jack Lief

Sure. Let me take the first part of the question about the extended release. So you’ll remember that BELVIQ is highly water soluble and it’s readily absorbed in the GI tract. So there are technical challenges associated with the compound that -- that’s absorbed so well. A lot of compounds are absorbed poorly and they receive -- they get absorbed – they’re absorbed over a period of time. With BELVIQ as I mentioned, in 90 minutes you get peak plasma concentrations.

So the technical challenges were that it was absorbed very quickly. So you needed to ameliorate that peak. We decided to do that in BID formulation early on recognizing that we would be able to go back and create potentially an extended release form post approval. We have done that. We have been successful at doing that, we believe and so we look forward to allowing that to occur. So the -- and I should mention that we’ll receive a $10 million milestone payment from Eisai once that is in place. So it was always contemplated that we would do that post approval. I’ll let the next part of your question was about the combination product. Bill you want to talk about the different arms in the study?

William Shanahan, Jr.

Yes. So the arms in this study, a 12 week study will look at lorcaserin or BELVIQ, 10 twice a day at singly and then in combination with 15 milligrams once daily in one arm – in a second arm and 15 milligrams twice daily in the third arm. So a three arm parallel group study.

Jack Lief

So keep in mind this is a pilot study and it’s designed to inform us of what the final product will look like, either it’s likely as a once a day product or otherwise. So this is the first real study in this area.

Thomas Wei - Jefferies & Company

And just -- flip in a quick follow-up question on the doses of phentermine in that study. I guess, I hadn’t looked at it this carefully before, but can you just remind us again how those doses that you’ve selected for phentermine for the combination study compared to the approved dosing schedule for phentermine and I thought that phentermine actually was approved for slightly higher doses at the high-end of their dose range and is the reason why maybe you are selecting something a little bit lower having to do with potentially twice daily dosing and concern around the blood pressure effects during the day?

Jack Lief

Bill?

William Shanahan, Jr.

No, actually phentermine is usually given 15 milligrams once or twice daily. So we’re just mimicking that to get some initial pilot information and then once we get this data, we’ll assess and make our plans to go further.

Thomas Wei - Jefferies & Company

Okay, great. Thank you.

Operator

Thank you. And our next question comes from Scott Marx from Samlyn.

Scott Marx - Samlyn Capital LLC

Hi. Good morning. I just had a quick question on the math. If you guys shipped 41,000 bottles at a gross price of $200 that gets you to around $8.2 million in gross revenues and the gross to net discount was 49%. So can you just kind of reconcile that number versus the 5.4 and why those are different and how we should think about that going forward?

Jack Lief

Robert?

Robert Hoffman

Yes. Scott this is Robert. It’s important to remember the 49% is year-to-date. So that doesn’t necessarily reconcile to the quarter. We didn’t give the quarterly numbers, so year-to-date it’s 49%.

Scott Marx - Samlyn Capital LLC

Okay. But I can figure out the quarterly number by …

Robert Hoffman

You can, yes.

Scott Marx - Samlyn Capital LLC

Okay. So 8.2 to get to 5.4.

Robert Hoffman

Yes.

Scott Marx - Samlyn Capital LLC

Okay. Thanks.

Robert Hoffman

Sure.

Operator

Thank you.

Jack Lief

Sorry, was there another question? (Indiscernible).

Scott Marx - Samlyn Capital LLC

Not from me.

Jack Lief

Okay. I’m going let Cindy close.

Cindy McGee

Great. Thank you so much for joining us today. Please let me know if you have any follow-up questions and we look forward to a productive week next week in Atlanta at the Obesity Society’s conference. Thank you.

Operator

Ladies and gentlemen thanks for participating in today’s conference. This concludes the program. You may all disconnect and have a wonderful day.

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Arena Pharmaceuticals (ARNA): Q3 EPS loss of $0.08, beats by $0.04. Revenue of $3.6M misses by $1.7M. (PR) Belviq net product revenue: $2M.