Arena Lays Off 130 Employees After Weight Drug Disappointment
San Diego’s Arena Pharmaceuticals (NASDAQ: ARNA) said in a regulatory filing today it’s laying off approximately 130 employees, or 31 percent of its U.S. workforce, over the next four weeks. Check Xconomy’s San Diego layoff tracker here to see our running tally of local tech sector layoffs.
In its SEC filing, Arena says, “We believe it is necessary to reduce our cash usage and provide Arena with additional financial flexibility” to support the development of its weight loss drug lorcaserin. Results of the obesity drug’s late-stage clinical trial are expected by the end of the year.
Arena has concentrated its drug development efforts on lorcaserin since December, when the biotech ended work on developing a drug candidate for insomnia. But investors were underwhelmed by the results of an earlier clinical trial of lorcaserin that the company reported at the end of March. Although those trials showed lorcaserin caused no heart damage, which was a key concern, Luke reported that patients in the study lost an average of only 5.8 percent of their body weight, and shares of Arena plummeted.
Just a week earlier, Arena said it got a $50 million equity financing commitment from Azimuth Opportunity. Under the commitment, Arena will decide over next 18 months when to sell shares at an undisclosed discount to Azimuth.
In its filing, Arena says the company expects to incur cash charges of approximately $3 million, mostly during the second quarter, in connection with employee termination costs, including severance and other benefits. Arena estimates the cutbacks will result in annual operating cost savings of approximately $25 million.