Some biotech stocks might be struggling in 2019, but not Arena Pharmaceuticals (NASDAQ:ARNA). Its share price is up over 20% so far this year. However, that's a lot less than this summer when Arena's shares were up more than 60%.
Arena announced its third-quarter results after the market closed on Thursday. Don't expect the biotech's news to kick off a dramatic rebound, but a major slide isn't likely, either. There was really only one number that mattered in Arena's Q3 results -- and it was a big one.
By the numbers
Arena's top line went in the wrong direction in the third quarter. Revenue fell 61% year over year, to $1.4 million. Analysts were expecting that the company's revenue for Q3 quarter would be close to $2.06 million.
The company reported a net loss of $72.9 million, or $1.46 per share, based on generally accepted accounting principles (GAAP). This compared to a net loss of $34.3 million, or $0.70 per share, in the same period in 2018. The Q3 net loss was also worse than the consensus analyst estimate of a net loss of $1.32 per share.
Arena ended the third quarter with cash, cash equivalents, and short-term investments of $1.2 billion. The company had $686.9 million on hand as of Dec. 31, 2018.
Behind the numbers
Does anyone really care that Arena's revenue dropped and its net loss worsened? Not really.
The biotech's only source for revenue right now is collaboration and royalty revenue. In the third quarter, Arena received $811,000 from royalties and $539,000 from collaboration revenue.
But Arena's wider net loss was less a result of its lower year-over-year revenue and more from its increased spending. The company reported that its operating costs more than doubled from the prior-year period, to $80.7 million. Research and development costs totaled $60.3 million, while general and administrative costs were $20.4 million -- both roughly twice the levels from the same quarter last year.
The only number that really mattered in Arena's Q3 update was its cash position. Arena continues to enjoy a nice cash stockpile resulting from its deal with United Therapeutics to license pulmonary arterial hypertension (PAH) drug ralinepag.
What's important for Arena going forward is its pipeline progress. Expect some movement on that front in the near future.
CEO Amit Munshi said that Arena is still on course to begin a phase 2/3 study of etrasimod in treating Crohn's disease and file for FDA approval to begin a phase 1 study of experimental heart-failure drug APD418 this year. The company also has several clinical studies in progress, including its late-stage study evaluating etrasimod in treating ulcerative colitis, a phase 2 study evaluating etrasimod in treating atopic dermatitis, and a phase 2 study of olorinab in treating abdominal pain associated with irritable bowel syndrome (IBS).
The best news of all for the company coming out of the third quarter is that it should have plenty of cash to fund all of these clinical programs for a while to come.