Munshi performs weight loss surgery at Arena as it cuts 73% of staff


He’s only been Arena’s ($ARNA) president and CEO for two months, but biotech vet Amit Munshi is wasting no time getting to know his new staff as the company announces a culling of 100 U.S. workers and (another) shift in focus.

The cuts--which represents a massive 73% of the entire company’s workforce--saw its shares halted on the news, as it prepares to cut 100 research, manufacturing, and general and administrative staff by the end of August.

It said it will eventually save around $17 million a year on fewer staff pay packets, and around $6 - $8 million for other expenses. It will however cost the biotech $6.1 million in Q2 according to its figures for severance packages.  

Details were thin on the ground, but Arena said it was also looking to create a “strategic shifting of priorities to emphasize its proprietary clinical stage pipeline.”

The biotech has a number of R&D tie-ups at various stages with Boehringer, Idlong, Axovant, and Eisai. It is these deals that the company is “currently directing our activities and resources,” according to a brief statement.

In its own pipeline, the San Diego company has a Phase II ulcerative colitis candidate in the form of etrasimod (APD334), the early-stage cannabinoid-2 pain drug APD371, as well as ralinepag (APD811), an agonist of the prostacyclin receptor, which is in an ongoing Phase II trial for pulmonary arterial hypertension.

Munshi became the new head of the company in May, coming from a 4-year stint at moribund Epirus Biopharmaceuticals ($EPRS), which is now too slashing staff. He took over from Arena’s former CEO and co-founder Jack Lief, who was asked to step down by the board last October.

His departure led to the first round of cuts and R&D shifts, which saw it ax 80 jobs (35% of its staff) and focus on "near-term" activities.

So what’s prompted the culls? Arena has been losing market share with its anti-obesity drug Belviq (lorcaserin), which has proved to be a troublesome therapy to market, and has woefully underperformed--putting major pressure on its balance sheet.

But while its new marketing partner Eisai help sales tick up, last year the two were hit by a recall of nearly 122,000 bottles of Belviq over a labeling glitch, compounding its difficulties.   

The obesity market overall has failed to be a major revenue driver for biopharma since the first approval of Roche's ($RHHBY) Xenical (orlistat) in 1999 (an OTC form of a lower-dose form of orlistat is also now available), and comes despite the fact the obesity is a major health concern in the western world.

Over the past few years, a handful of other drugs have gained U.S. marketing approval, including: Orexigen's ($OREX) Contrave (which recently bought back all rights to the drug from Takeda), Vivus' ($VVUS) Qsymia (phentermine/topiramate) as well as Belviq. But they have struggled to reach major sales heights, with each biotech dealing with its own struggles in the past year.

This could however change with last year’s launch of Novo Nordisk's ($NVO) obesity shot Saxenda (liraglutide [rDNA origin] injection)--which is essentially a new formulation of liraglutide, the main ingredient in its GLP-1 diabetes med Victoza.

The drug is expected to add $2.4 billion in sales for the company, with the anti-obesity market on a slow and steady trajectory--although Belviq seems to be at the bottom end of this slow-moving train, with its U.S. market share being around 25%.

Obesity is a large and growing problem in the U.S. with many co-morbidities attached to those with higher BMI scores, and there is the potential for a safe and efficacious treatment to be a major blockbuster.

According to the U.S. Centers for Disease Control and Prevention, two-thirds of American adults are overweight or obese and the prevalence of obesity in the U.S. more than doubled among adults from 1980 to 2010.

Many of the approved drugs have however had to tread a tough regulatory path due to their serious potential side effects, predominantly over their effects on the heart, which have pegged back the market’s potential.

- check out the release

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