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Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)

Q2 2014 Earnings Conference Call

August 01, 2014 8:30 a.m. ET

Executives

Robert E. Hoffman – SVP, Finance and CFO

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

Craig M. Audet – SVP, Operations and Head of Global Regulatory Affairs

Dominic P. Behan – Co-Founder, Director, EVP and Chief Scientific Officer

William R. Shanahan – SVP and Chief Medical Officer

Analysts

Thomas Wei – Jefferies & Company

Jason N. Butler – JMP Securities

Steve Byrne – Bank of America Merrill Lynch

Lee Kalowski – Credit Suisse

Bob Ai – Wallach Beth

Matthew Andrews – Wells Fargo Securities

Edward A. Tenthoff – Piper Jaffray

Matthew J. Lowe – JPMorgan

Operator

Good day everyone, and welcome to Arena Pharmaceuticals’ Second Quarter 2014 Financial Results Conference 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 Chief Financial Officer, Mr. Robert Hoffman. Mr. Hoffman, please go ahead.

Robert E. Hoffman

Thanks, Kevin. Thank you for joining us. I am Robert Hoffman, Arena’s Chief Financial Officer. We hope that you had a chance to review the news release we issued earlier this morning that included the summary of activities and our financial results for the second quarter of 2014.

Joining me on today’s call with prepared remarks will be Jack Lief, our President and Chief Executive Officer; and Craig Audet, our Senior Vice President of Operations and Head of Global Regulatory Affairs; Dominic Behan, our Chief Scientific Officer; and Bill Shanahan, our Chief Medical Officer, are also available to address your question.

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, advancement potential, regulatory applications and collaborations; commercialization of BELVIQ, including product supply marketing the sales force, physician and patient awareness, market adoption and reimbursement; financial results, conditions, 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 not to 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 timing, results and cost of commercialization, R&D and manufacturing; 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; activities and results related to our collaborations and our entry into additional 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 morning, and thanks for joining us today. The second quarter was one in which we enjoyed some notable achievements for BELVIQ, advanced our lorcaserin life-cycle management programs and progressed our internally discovered pipeline.

I’d like to begin this morning’s call with some statistics for BELVIQ. First, more than 43,000 healthcare practitioners have prescribed BELVIQ. Second, since the initiation of direct-to-consumer television advertisements in mid April, new BELVIQ prescribers have increased from approximately 800 per week to approximately 1,200 per week. Third, in the second quarter more than 110,000 prescriptions were filled, an increase of 43% over the previous quarter and we’ve recently seen estimated total prescription surpass 10,000 per week milestone. Fourth, more than 330,000 total prescriptions have been filled since launch.

Eisai believe that their deployment of an additional 200 sales representatives in July will augment this prescription growth as it allows them to increase their sales force reach to approximately 92,000 physicians. In early July Eisai held a meeting where there are 600 representatives for BELVIQ gathered for updated promotional, planning, product education and compliance training.

The Arena management team attended this event and we were not only impressed with the skill and drive of these field professionals, but also with the additional marketing strategies and accompanying resources being employed by Eisai to support them.

Beyond the U.S. we recently entered into a marketing and supply agreement for BELVIQ in Israel with Teva Pharmaceuticals local subsidiary. Teva was founded in 1901, and is a highly regarded and recognized pharmaceutical company. The structure of this agreement is similar to others we’ve established. We will manufacture and sell at Teva at a purchase price equal to 35% of our annual net sales of BELVIQ.

In addition, we receive a $0.5 million upfront payment and are eligible to receive milestone payments upon regulatory submission and approval of BELVIQ as well as purchase price adjustment payments based on Teva’s annual net sales.

On today’s call, Craig will provide an update on our lorcaserin life-cycle management activities as well as the advancement of our internally discovered pipeline. Robert will then review our financial results for the second quarter and I’ll close with a review of our upcoming developments before opening the call to your questions.

I’ll now turn the call over to Craig.

Craig M. Audet

Thank you, Jack. At Arena our mission is to improve health by bringing innovative medicines targeting G protein-coupled receptors patients. This commitment is evident in the approval of BELVIQ, the advancement of BELVIQ’s life-cycle management programs and by the progress that we’ve made in advancing our other internally discovered novel drug candidates.

We created a dual track of opportunity by exploring life-cycle management program for lorcaserin in addition to developing our current pipeline of internally discovered drug. This dual track allows us to take advantage of the previous development we completed for BELVIQ, we can apply much of the information that has already been established to new indications, combinations and formulations in order to potentially bring them to market in the short term while we advance our novel programs into proof of concept.

In June, our 12-week phase 2, proof of concept trial to evaluate lorcaserin as an aid to smoking cessation (inaudible) target of at least 600 patients and we expect to have results for the study around the end of the year. The trial was fully enrolled in approximately two months perhaps speaking to the number of people in the United States who want to quit smoking.

However, market research as well as the scientific literature shows us that concern about potential weight gain while trying to quit smoking can be barrier to attempting to quit and may lead some successful quitters to resume smoking. We believe that BELVIQ can help patients avoid weight gain while quitting smoking it could be a significant advancement to therapy.

The 12-week pilot study of the co-administration of lorcaserin and phentermine also met its enrolment target of at least 225 patients earlier this year and we expect to have these results around the end of the year as well. The results of this trial should provide us with additional safety data that will enhance the body of knowledge we have for lorcaserin and will help to inform our decision on possible further development of those combinations at the potential additional treatment choice for physicians and patients beyond lorcaserin alone.

With respect to our development plans for once daily lorcaserin 20 milligram extended relief tablet, we’re currently manufacturing supplies and we expect to start bio availability trials this quarter with results expected by mid next year.

Lastly, the cardiovascular outcome trial CAMELIA, which will evaluate BELVIQ’s effect on the incidence of major adverse cardiovascular events compared to placebo is currently enrolling. CAMELIA is also designed to evaluate whether BELVIQ reduces the incidence of conversion to type 2 diabetes and to evaluate whether BELVIQ is superior to placebo in reducing cardiovascular events.

In regard to our clinical stage drug candidates, this quarter we initiated a phase 1 multiple ascending dose trial of APD334, our S1P1 receptor agonist intended for the treatment of autoimmune diseases. In the prior single ascending dose trial, we saw an approximate 35 hour half-life, which suggest the compound could be amenable to once daily oral dosing.

We also saw a dose dependent reduction in lymphocyte trafficking. This is thought to be important because reducing lymphocyte trafficking helps to decrease the number of lymphocytes in the circulation that are available to attack the body’s own tissues. We expect to have results for the current trial around the beginning of next year.

A second clinical stage program in our pipeline is APD811, our non-prostanoid prostacyclin agonist intended for the treatment of vasospastic disease. We’ve completed a phase 1 program for this compound and are in the final stages of preparatory work required to initiate a phase 2 trial in pulmonary arterial hypertension.

In the phase 1 program, we saw an approximate 25 hour half-life indicating that the compound could be dosed orally once or twice daily. We also typical class mediated signs of pharmacology at the high doses, which could indicate that we’re engaging the appropriate receptor. We expect to begin the phase 2 trial later this year.

Our third clinical stage program discovered by Arena is Temanogrel, an inverse agonist of the serotonin 2A receptor intended for the treatment of arterial thrombotic diseases. We believe this compound has a dual mechanism of action that inhibits platelet aggregation while also preventing the construction of blood vessels. The clumping together of plate within the blood and blood vessel narrowing are part of the sequence of events leading to the formation of clots.

Arena completed a phase program Temanogrel and centers established a collaboration with Ildong Pharmaceuticals in South Korea. Ildong is investigating the safety of co-administration of Temaogrel and Aspirin and Clopidogrel prior to conducting a phase 2 proof of concept in Korean patients. Once completed the compound will return to Arena for further development, Ildong will maintain rights for the compound in South Korea and we will continue to hold rights in the rest of the world.

Our fourth clinical stage program is our phase 1 investigation of APD371, a cannabinoid 2 receptor agonist intended for the treatment of pain. Cannabinoid receptors have been shown to modulate both acute and chronic pain and it is theorized that cannabinoid agonist that selectively target CB2 receptors should be free of the psychoactive affects associated with CB1 agonist. Perhaps along for more effective dosing and without the side effects associated with opioids or (inaudible), this program remains ongoing and we expect to have phase 1 results around the second quarter of next year.

Before handing the call over to Robert, I would like to provide a brief update on the pending market applications for BELVIQ. We recently reported that Health Canada informed Eisai that its application contained deficiencies that must be addressed for its review to continue. As an update, Eisai is continuing its ongoing dialogue with Health Canada discussing possible ways to address their concerns. According to Health Canada procedures once Eisai submits the response to the concerned, the review period can be up to 300 days. The marketing applications in Mexico, Brazil, and South Korea remain ongoing.

I would now like to turn the call over to Robert who will review our financials.

Robert E. Hoffman

Thanks, Craig. I will focus my comments on highlights of our financial performance to the three months ended June 30, 2014 compared to three months ended June 30, 2013. I also refer you to financial results and news release. For the five financial results 2014 we’ll refer to the three months ended June 30, 2014 and 2013 will refer to the three months ended June 30, 2013.

For 2014, we recorded revenues of $12.8 million compared to $68.9 million for 2013. 2014 revenues included $3.5 million in net product sales of BELVIQ, $6.7 million of reimbursements from Eisai primarily for development work for smoking cessation, a once-daily formulation, $2 million from amortization of upfront payments. 2013 revenues included $65 million in milestone payments from Eisai, we earned in connection with the DEA’s final scheduling designation of BELVIQ and $1.3 million in net product sales of BELVIQ.

All of the $3.5 million in net product sales of BELVIQ for 2014, $3.1 million represented 31.5% of Eisai’s net product sales which were $9.9 million and $0.4 million related to redemptions of the 15 day pre-dodgers. We and Eisai currently recognized net product sales revenue when Eisai ships product to its wholesalers.

During the quarter ended June 30, 2014, Eisai shipped approximately 88,000 bottles of BELVIQ. The growth in net production totaled 44% for the quarter ended June 30, 2014 comparable with the growth of net production of 42% in the first quarter of 2014. 2014 cost of product sales of BELVIQ totaled $1.5 million which included $400,000 for free trial voucher redemptions. Cost of product sales consist primarily of direct and indirect cost related to manufacturing BELVIQ including salaries, share based compensation and other personal costs, machinery depreciation cost and amortization expenses related to our manufacturing facility production licenses. We recorded $600,000 in cost of product sales for BELVIQ in 2013.

Research and development expenses for 2014 increased to $27 million from $18.8 million for 2013. The increase is primarily attributable to increases in external clinical and preclinical studies seasonal expenses including manufacturing costs and to a lesser extent personnel costs in hiring as well as increases in salaries of existing personnel.

In 2014, we recorded as revenue $6.6 million in development expenses reimbursed by Eisai which are also included in our R&D expenses. For 2014, R&D expenses included $1.7 million in non-cash share based compensation expense compared to $1.1 million for 2013.

General and administrative expenses totaled $9.1 million for 2014 compared to $8.6 million for $2013. G&A expenses for 2014 included $1.6 million in non-cash share based compensation compared to $1.3 million for 2013. We recorded a gain on sales of available-for-sale securities of $33.3 million in 2014 related to our sales of shares we held in TaiGen Biotechnology Company Limited.

Net income was $7.5 million for 2014 or $0.03 per share on a fully diluted basis compared to net income of $40.1 million for 2013 or $0.18 per share fully diluted. Cash, cash equivalents and short term investments available for sale totaled $219.1 million at June 30, 2014 compared to $221.9 million at December 31, 2013. On June 30, 2014 we had approximately 219.8 million shares of common stock outstanding.

I would now like to give some color on the payable to Eisai that is in our liability section of our financial statement. On March 31, 2014, the payable to Eisai totaled to $19.3 million. This was primarily due to the net selling price of BELVIQ being lower than the initial estimated selling price that Eisai paid us for product before October 1, 2013. The estimated selling price that Eisai paid us did not include deductions for vouchers, savings card or for certain other items related to the product launch.

After October 1, 2013, the estimated net selling price was reduced to better reflect the actual net selling price. Under our agreement with Eisai at the end of each of Eisai’s fiscal year we reconciled any difference between the estimated price and the actual amount earned based on that sales with respect to product sold in the prior fiscal year. Any excess amount paid for product that is not yet been sold remains in the liability until the end of the fiscal year and such product has been sold.

Subsequent to the end of the fiscal year on March 31, 2014, we refunded Eisai the portion of these excess payments related to product sold to their distributors through March 31 which totaled approximately $5.9 million. We would expect to pay the remaining liability to Eisai after the end of Eisai’s next fiscal year end March 31, 2015 which was $13 million at June 30, 2014.

I would also like to give more details on our equity investment in TaiGen and the related accounting treatment of such investment. Prior to the IPO our equity investment was recorded at zero cost basis. In January 2014, TaiGen completed an IPO in its common stock gain to trade in Taiwan. Any gain on TaiGen stock was unrealized and was recorded as a component of accumulated other comprehensive income and stockholder’s equity until such shares are sold. According to applicable accounting rules, we began recording our common stock in TaiGen at its fair value based on its trading price.

In the second quarter of 2014, we sold $18.9 million shares of TaiGen and recorded a gain of $33.3 million on our income statement. At June 30, we had $18.3 million and other comprehensive income in stockholders equity for an unrealized gain on the remaining 10.6 million shares we held in TaiGen.

I will now turn the call back over to Jack.

Jack Lief

Thanks Robert. As we have discussed on today's call, we see a significant number of opportunities ahead for Arena. We look forward to updating you on the following, continued BELVIQ prescription growth, completion of lorcaserin Phase 2 smoking cessation trial, once-daily formulation and the lorcaserin and phentermine co-administration pilot study, initiation of a Phase 2 trial for APD811, progression of Phase 1 development of APD334 and APD371, advancement of Temanogrel with Ildong and updating you on the progress of our other programs as appropriate.

Before opening the call to questions, I would like to discuss my recent stale of Arena stock which occurred under what is commonly referred to as a 10b5-1 trading plan. Such plans are used to automatically sell stock at a future date. The timing of the stock sale was set when I established the trading plan about a year ago shortly after the launch of BELVIQ and the sale was intended to provide some diversification. Other than one set of ten year options which were expiring, I’ve never sold stock since founding the company.

The beneficial ownership table in our recent proxy statement demonstrates that I continue to hold a substantial majority of the equity interest I held prior to the sale. I remain confident in the future of our company and remain committed to Arena's vision of becoming the industry leader in the discovery, development, and commercialization of our new medicine.

In this regard I am pleased to report that BELVIQ has recently been nominated by the Galien Foundation award committee for the 2014 pre-Galien USA award in the best pharmaceutical aging category. The award recognizes the extensive research necessary to develop innovative medicines that would change health and we are honored to be part of the community of those nominated for this award.

I will now open the call to questions. Operator, Kevin?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Thomas Wei with Jefferies.

Thomas Wei – Jefferies & Company

Thanks. Just a couple of questions on the BELVIQ life-cycle management program and so for the phentermine combination trial, there has been a lot of back and forth and uncertainty on whether or not you are going to tell us what that data looks like when you have the results around the end of the year? Have you and Eisai decided on a disclosure plan and whether or not we are actually going to hear about it at the end of the year? And then I had a question on the smoking cessation program.

Jack Lief

Yes, you definitely will hear about it at the end of the year. The typical way that this information is rolled out, top line data comes out, and then once the results are published in a peer reviewed forum, the majority of the data comes out at that point in time. So, the data will be coming out without doubt.

Thomas Wei – Jefferies & Company

And can you just clarify that that includes the data on the weight loss and points in the trial. It's not just – it won't just be a top line announcement that the combination was safe?

Jack Lief

Absolutely.

Thomas Wei – Jefferies & Company

Okay, thank you, that's very helpful. And then, on the smoking cessation study as we start taking a closer look at that, can you just remind me what is the study powered to show on the primary end point?

William R. Shanahan

Yes. We power this based on the (inaudible) stage to show what their variability and their data to be able show significant difference in the order, I think, I can’t remember exactly about high 30% to 19% are something like that 12-week rate of cessation.

Jack Lief

200 brand, so we’ve got lot of patients in there.

Thomas Wei – Jefferies & Company

And then Jack, just one last question on your stock sale comments, just to clarify there, it sounds like your trading plan just has a certain amount of stock sold at particular dates in the future regardless of price, is that how it’s structured?

Jack Lief

Well, that’s how the last trading plan was structured, I don’t currently have a future trading plan.

Thomas Wei – Jefferies & Company

Great, thank you.

Operator

Your next question comes from Jason Butler with JMP Securities.

Jason N. Butler – JMP Securities

Hi, thanks for taking the question. Just first question on BELVIQ, just wondering if you can give us any update on your prospect what diary you have on persistence of treatment with BELVIQ currently? Thanks.

Jack Lief

Eisai has not announced specific data on it.

Jason N. Butler – JMP Securities

Okay, great. And then, just a question on the R&D line, could you breakout or give us any color on what proposition of the R&D is BELVIQ related versus the pipeline?

Robert E. Hoffman

Certainly, a significant portion was BELVIQ and as I tried to highlight in the quarter of that $27 million, we got a reimbursement of $6.6 million. So, you saw that not only in the R&D line but also in the revenue line and a lot of that were related to the smoking cessation trials of the once-daily formulation.

Jason N. Butler – JMP Securities

Okay, great. Thanks for taking the questions.

Jack Lief

Sure.

Operator

Your next question comes from Steve Byrne with Bank of America.

Steve Byrne – Bank of America Merrill Lynch

Hi Robert, I was hoping I could better understand this payables line item you were talking about, if I heard you correctly at the end of the first quarter, you had a $19 million liability and do I understand that correctly that that is – that’s the difference between the product purchase price that was agreed with Eisai versus the net selling price that they realized during the previous fiscal year, is that right?

Robert E. Hoffman

Steve, we originally sold them products right at launch and actually prior to once that was an estimated selling price that we agreed to from basically March 31 thru – September 30 thru October 1 of 2013. That estimated selling price was higher than what the actual price ended being so we didn’t know what the price is going to be here. They didn’t know what the price at the time then on October 1, I set it that was more closely related to what the net selling price was. So, there was a difference there, every year at March 31, we do a reconciliation and the portion that actually get sold to the distributor we refund that amount back to them in this case. It’s a refund because the estimated was higher than the actual. And so, we expect that amount that wasn’t sold through the distributor will get sold through in the next fiscal year from April 1 to March 31 and we will pay that additional $13 million after March 31, 2015.

Steve Byrne – Bank of America Merrill Lynch

Okay. And so, the only amount of refund was that $5.9 and that was for product that was shipped since you launched?

Jack Lief

Correct. Since we launched and before October 1, 2013.

Steve Byrne – Bank of America Merrill Lynch

Okay. Now there was no change in that product purchase price on April 1, right?

Robert E. Hoffman

That’s correct, yes that’s correct.

Steve Byrne – Bank of America Merrill Lynch

Okay. So, moving forward would you expect this liability not to really move up or down given that that purchase price is roughly in line with net selling price?

Robert E. Hoffman

That’s what I would expect. Now, obviously if the growth moves around one way or the other they will move, but that’s my expectations that you got it.

Steve Byrne – Bank of America Merrill Lynch

Okay. And out of the vial shipped, is there a portion of that was attributed to free vials?

Robert E. Hoffman

Yes. So, included in the 88,000 bottles were an estimate for vouchers and remember that we get to pay cost to goods on that.

Steve Byrne – Bank of America Merrill Lynch

And what was the volume?

Robert E. Hoffman

In the quarter 88,000 bottles were shipped.

Steve Byrne – Bank of America Merrill Lynch

Did you disclose how much of it was for free?

Robert E. Hoffman

We did not, no. What we disclosed was, we got reimbursed $400,000 for free goods.

Steve Byrne – Bank of America Merrill Lynch

Okay, alright. And then, just one question on the phentermine combo study, the primary end point is the proportion of patients reporting at least one (inaudible) adverse event. What fraction of patients on BELVIQ would you expect to report an adverse event in that 12-week period, what do you think that one arm will likely report?

Jack Lief

The study is still blinded, so we are no – Bill do you have any color on that?

William R. Shanahan

The only color I would add is that we looked at our data and we powered it for composite end point on this. So, without getting into the specifics so we’re powered to address this end point.

Steve Byrne – Bank of America Merrill Lynch

But, with respect to that it’s powered to not show, I mean, you’re not expecting a statistically significant difference in that primary end points between the three arms?

William R. Shanahan

Yes.

Steve Byrne – Bank of America Merrill Lynch

Okay, alright, thank you.

Operator

Our next question comes from Lee Kalowski with Credit Suisse.

Lee Kalowski – Credit Suisse

I wanted to first ask about the BELVIQ revenue number. So, if I look at the reported number of $9.9 million it looks like about a 17% increase or so and on the bottle basis 88,000 versus 73,000 so that’s like 20%, 21%. But the prescription growth that you cited in the press release is considerably higher than that, I’m wondering if you can just help us reconcile the difference between revenue growth, bottle growth and prescription growth?

Robert E. Hoffman

Sure. The difference really relates to the vouchers, the voucher utilization.

Lee Kalowski – Credit Suisse

But it sounded like that growths in that was similar, I mean, is the other possibilities on destocking?

Robert E. Hoffman

We haven’t given any color on the wholesaler inventory, it primarily relates to the vouchers.

Lee Kalowski – Credit Suisse

And then, on the collaborative agreement of milestone line item and the revenues, did you give us, sorry if I missed it, did you break that out some of the components of that in your introductory comments, Robert?

Robert E. Hoffman

Yes. For the quarter $6.6 million was reimbursements from Eisai and that primarily related to the smoking cessation trial that we’re running as well as some payments for once-daily formulation.

Lee Kalowski – Credit Suisse

Okay. And what’s the expectation going forward on the reimbursement, is this sort of a reasonable level that we should thinking about as we model future quarters on the reimbursement side?

Jack Lief

This was a larger quarter just because the smoking cessation is in full swing right now so that will take graph little bit in the next quarter as well as QD. I gave guidance a [rush] a little bit ahead of guidance, the smoking cessation trial ended up being a little bit more expensive, so I would taper it for the rest of the year.

Lee Kalowski – Credit Suisse

Okay, thank you.

Operator

Our next question comes from Bob Ai with Wallach Beth.

Bob Ai – Wallach Beth

Hi guys, can you hear me well?

Jack Lief

Yes.

Bob Ai – Wallach Beth

Can you give us little more color on BELVIQ’s situation in Brazil, Mexico and in Korea?

Jack Lief

I’ll let Craig address that.

Craig M. Audet

Sure. Hi, Bob. Right now, those three applications are ongoing so they’re under review. As you can imagine we don’t get a lot of day-to-day information. We expect Brazil and South Korea to have some sort of a decision or communication either around the end of this year or the beginning of next year. Mexico right now is really a black box to us, there has not been a lot of communication from the health authority in Mexico. I know we’ve talked in the past about the fact that they’ve sort of reorganized the way that they do these applications and they’ve kind of reshuffled things around. So, when we get more insight into where they are in their process, we can try to predict when we might hear something from them, some sort of a final decision. But, at this point we just don’t know.

Bob Ai – Wallach Beth

Okay. I want to ask BELVIQ sales question again, I know you already answered. So, is that – mostly it is a voucher, so you mean, the increase in – on the script it says, free voucher?

Jack Lief

A good percentage is related to the free voucher, correct.

Robert E. Hoffman

Not mostly free vouchers in the scripts, but a percentage of that, yes.

Bob Ai – Wallach Beth

Alright, okay, thank you.

Operator

Our next question comes from Matthew Andrews with Wells Fargo Securities

Matthew Andrews – Wells Fargo Securities

Good morning. Thank you for the opportunity to ask couple of questions. First one is for Bill, can you – for smoking cessation assuming to see a positive signal in phase 2, would you mind talking about what the phase 3 program would look like and the studies? And then, when do you think you and Eisai could have the interface to meeting with regulatory agencies?

And then, Craig, you guys had some nice A1C reduction, the M study, so can you talk about the collaborations rationale for pursuing smoking cessation versus a type 2 diabetes label which conceivably could help you improve reimbursement longer term in the U.S.? Thanks.

William R. Shanahan

So, with respect to your first question, it’s really premature for us to outline our plans, we will obviously look at the data and help inform our decision and then we will collaborate with FDA and with, obviously with Eisai in determining our path forward. As I am sure, we expect to have data around the end of the year for you on that first trial.

Jack Lief

And of course, we’ll talk to FDA within end of phase 2 assuming that’s appropriate as soon as we can, yes. Craig?

Craig M. Audet

Matthew, I think we talked a little bit about this Matthew, in terms of smoking versus type 2. We see smoking as a quicker hit than the type 2 diabetes indication at this point. I think, I’ve mentioned to you, we haven’t given up on type 2 diabetes. Eisai specifically is very interested in it, we’ve tried to work some of those end points into the CBOT that they’re running, for longer term CBOT and there have been discussions with the agency, with FDA about what would be required to type 2 diabetes. But, we see the smoking as a real unmet medical need at this point, we think if we can do get efficacy with the weight neutral or at least a weight reduction of fat that could be a significant advancement of therapy because as I said in my prepared remarks, the literature and the market research we’ve done shows that a lot of patients don’t try to quit smoking because they don’t want to gain their weight. And many patients who do actually end up quitting start to gain the weight and start smoking again so they don’t gain weight. So, we see that as a potential significant advancement of therapy in the shorter term.

Matthew Andrews – Wells Fargo Securities

Got it, thank you.

Operator

Our next question comes from Edward Tenthoff with Piper.

Edward A. Tenthoff – Piper Jaffray

Thank you very much for taking my questions and I apologize if this question has been asked, I was just disconnected for few minutes. But, I guess surrounding on some of the overseas approval rates, we thought that you did the deal with Teva recently and I’m wondering if you can characterize sort of the Israeli market and when would they be filing there?

Jack Lief

Sure. So, in the last several decades the rate of overweight or obese population has tripled and is real. It’s estimated that about half the population is either overweight or obese based on the Israel Ministry of Health estimates. So, Teva is the leading company in Israel, a pharmaceutical company and so, we look forward to making this drug available in Israel for that – Craig, do you want to add something to this?

Craig M. Audet

Yes Ted, the last part of your question was about the filing, Teva plants has informed us that they plan to file before the end of the year.

Edward A. Tenthoff – Piper Jaffray

And congrats on the steady progress in scripts.

Jack Lief

Thank you.

Operator

Our next question comes from Cory Kasimov with JPMorgan

Matthew J. Lowe – JPMorgan

Hi there, it’s actually Matt Lowe in for Cory. I just have a quick question on BELVIQ, it seems like the trends on new subscribers are pretty encouraging recently. I was just wondering if you have any information on the percentage of patients who start on BELVIQ that refill that script, I think in the past you maybe had some limited data on that so just anything you can share with us on the percentage of patients who refill that script?

Jack Lief

Yes, Eisai has not shared that information publicly. We said in the past about 50%, so I’m not at liberty to update that number.

Robert E. Hoffman

One thing that Eisai did mention is that the reimbursement landscape continues to improve, they’re greater than 60%, they reiterated their target on the call last night of achieving 70%, actually the current data is, if you exclude the free vouchers over 70% of the prescription filled have commercial pay insurance, (inaudible) insurance that’s very encouraging to us.

Matthew J. Lowe – JPMorgan

Okay, thank you.

Operator

And I’m not showing any further questions at this time. I’d like to turn the conference back over to our host.

Robert E. Hoffman

Well, this concludes our second quarter 2014 financial results call, I’d like to thank you for joining us today and we also like to thank you for your continued support.

Operator

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

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Source: Arena Pharmaceuticals' (ARNA) CEO Jack Lief on Q2 2014 Results - Earnings Call Transcript
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