UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

For the quarterly period ended June 30, 2016

or

For the transition period from                     to

Commission File Number: 000-31161

 

ARENA PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

858.453.7200

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    o  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    o  Yes    x  No

The number of shares of common stock outstanding as of the close of business on August 4, 2016:

 

 

 

 

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ARENA PHARMACEUTICALS, INC.

INDEX

 

 

 

TRADEMARKS AND CERTAIN TERMS

Arena Pharmaceuticals®, Arena® and our corporate logo are registered service marks of Arena. BELVIQ®, BELVIQ XR®, and VENESPRI® are registered trademarks of our wholly owned subsidiary, Arena Pharmaceuticals GmbH. Any other brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

In this Quarterly Report on Form 10-Q, “Arena Pharmaceuticals,” “Arena,” “we,” “us” and “our” refer to Arena Pharmaceuticals, Inc., and our wholly owned subsidiaries on a consolidated basis, unless the context otherwise provides. “APD” is an abbreviation for Arena Pharmaceuticals Development.

Lorcaserin has been approved in the United States, South Korea and Mexico for weight management in a twice-a-day dosage formulation. The twice-a-day dosage formulation is being commercialized in the United States and South Korea under the brand name BELVIQ, and is expected to be commercialized in Mexico under the brand name VENESPRI. Lorcaserin has also recently been approved in the United States in a once-a-day dosage formulation, which is BELVIQ XR.

 

 

 

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PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

ARENA PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(In thousands)

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

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ARENA PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

(Unaudited)

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

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ARENA PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

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ARENA PHARMACEUTICALS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Arena Pharmaceuticals, Inc., which include our wholly owned subsidiaries, should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission, or SEC, from which we derived our balance sheet as of December 31, 2015. The accompanying financial statements have been prepared in accordance with US generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of our management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, “Revenue from Contracts with Customers.” ASU No. 2014-09 outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. ASU No. 2014-09 is effective for annual reporting periods, and interim periods within those periods, beginning after December 15, 2017. ASU No. 2014-09 allows for two methods of adoption: (a) “full retrospective” adoption, meaning the standard is applied to all periods presented, or (b) “modified retrospective” adoption, meaning the cumulative effect of applying ASU No. 2014-09 is recognized as an adjustment to the opening retained earnings balance for the year of implementation. We have not yet selected an adoption method as we are currently evaluating the impact of ASU No. 2014-09 on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” ASU No. 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity’s ability to continue as a going concern. ASU No. 2014-15 applies to all entities and is effective for annual and interim periods ending after December 15, 2016, with early adoption permitted. We do not expect the adoption of ASU No. 2014-15 to have a material impact on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU No. 2016-01 supersedes and amends the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and require equity securities to be measured at fair value with changes in the fair value recognized through net income. The amendments allow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The amendments also require enhanced disclosures about those investments. ASU No. 2016-01 is effective for annual reporting periods, and interim periods within those periods, beginning after December 15, 2017, and calls for prospective application, with early application permitted. We do not expect the adoption of ASU No. 2016-01 to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases.” ASU No. 2016-02 amends the accounting guidance for leases. The amendments contain principles that will require lessees to recognize most leases on the balance sheet by recording a right-of-use asset and a lease liability, unless the lease is a short-term lease that has an accounting lease term of twelve months or less. The amendments also contain other changes to the current lease guidance that may result in changes to how entities determine which contractual arrangements qualify as a lease, the accounting for executory costs (such as property taxes and insurance), as well as which lease origination costs will be capitalizable. The new standard also requires expanded quantitative and qualitative disclosures. ASU No. 2016-02 is effective for annual reporting periods, and interim periods within those periods, beginning after December 15, 2018, with early adoption permitted. ASU No. 2016-02 requires the use of the modified retrospective transition method, whereby the new guidance will be applied at the beginning of the earliest period presented in the financial statements of the period of adoption. We are currently evaluating the impact of ASU No. 2016-02 on our consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting.” ASU No. 2016-09 is designed to simplify several aspects of accounting for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and forfeiture rate calculations. ASU No. 2016-09 is effective for annual reporting periods, and interim periods within those periods, beginning after

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December 15, 2016, with early adoption permitted. We are currently evaluating the impact of ASU No. 2016-09 on our consolidated financial statements.

The preparation of financial statements in accordance with GAAP requires our management to make estimates and assumptions that affect the reported amounts (including assets, liabilities, revenues and expenses) and related disclosures. The amounts reported could differ under different estimates and assumptions.

 

 

2. Fair Value Disclosures

We measure our financial assets and liabilities at fair value, which is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

We use the following three-level valuation hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value our financial assets and liabilities:

 

The following tables present our valuation hierarchy for our financial assets and liabilities that are measured at fair value on a recurring basis, in thousands:

 

 

 

 

3. Inventory

Inventory consisted of the following, in thousands:

 

 

 

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4. Land, Property and Equipment

Land, property and equipment consisted of the following, in thousands:

 

 

 

5. Accounts Payable and Other Accrued Liabilities

Accounts payable and other accrued liabilities consisted of the following, in thousands:

 

 

 

6. Marketing and Supply Agreement with Eisai

The following table summarizes the revenues we recognized under our collaboration with Eisai Inc. and Eisai Co., Ltd., which we collectively refer to as Eisai, in thousands:

 

 

The following table summarizes the deferred revenues under our collaboration with Eisai, in thousands:

 

 

 

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7. Share-based Activity

Share-based Compensation.

We recognized share-based compensation expense as follows, in thousands:

 

Share-based Award Activity.

The following table summarizes our stock option activity during the six months ended June 30, 2016, in thousands (except per share data):

 

 

The following table summarizes activity with respect to our time-based restricted stock unit awards, or RSUs, during the six months ended June 30, 2016, in thousands (except per share data):

 

 

During the six months ended June 30, 2016, the remaining Total Stockholder Return, or TSR, performance restricted stock unit, or PRSU, awards that we granted to our executive officers in March 2013 were forfeited without any earnout based on the TSR of our common stock relative to the TSR of the NASDAQ Biotechnology Index over the three-year performance period that began on March 1, 2013. In the aggregate, the target number of shares of common stock that could have been earned under the PRSUs granted in March 2013 was 780,000. Except for those cancelled due to employment separation from Arena, the PRSU awards granted in March 2014 and March 2015 are still outstanding at June 30, 2016.

 

 

8. Concentrations of Credit Risk and Major Customers

Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents. We limit our exposure to credit loss by holding our cash primarily in US dollars or, from time to time, placing our cash and investments in US government, agency and government-sponsored enterprise obligations and in corporate debt instruments that are rated investment grade, in accordance with an investment policy approved by our Board of Directors.

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Eisai, under our Second Amended and Restated Marketing and Supply Agreement, or Eisai Agreement, and Ildong Pharmaceutical Co., Ltd., or Ildong, under our Marketing and Supply Agreement, or Ildong Agreement, are the exclusive distributors of BELVIQ in the United States and South Korea, respectively. Eisai also has the exclusive rights to distribute BELVIQ XR and VENESPRI in the United States and Mexico, respectively. These are the only jurisdictions for which lorcaserin has received approval. We also produce drug products for Siegfried AG, or Siegfried, and, to a lesser extent, another third party under toll manufacturing agreements.

In May 2015, Arena Pharmaceuticals GmbH, or Arena GmbH, which is our wholly owned subsidiary, and Roivant Sciences, Ltd., or Roivant, entered into a Development, Marketing and Supply Agreement, or Axovant Agreement, under which Arena GmbH granted Roivant exclusive worldwide rights to develop and commercialize nelotanserin, subject to regulatory approval. In October 2015, Roivant assigned the Axovant Agreement to its subsidiary, Axovant Sciences Ltd., or Axovant. We also provide certain services and will manufacture and sell nelotanserin to Axovant.

In December 2015, we and Boehringer Ingelheim GmbH entered into an exclusive agreement, or Boehringer Ingelheim Agreement, to conduct joint research to identify drug candidates targeting an undisclosed GPCR that belongs to the group of orphan central nervous system, or CNS, receptors.

Percentages of our total revenues are as follows:

 

 

 

9. Net Loss Per Share

We calculate basic and diluted net loss per share using the weighted-average number of shares of common stock outstanding during the period.

Since we are in a net loss position, in addition to excluding potentially dilutive out-of-the money securities, we exclude from our calculation of diluted net loss per share all potentially dilutive in-the-money (i) stock options, (ii) RSUs, (iii) PRSUs, (iv) unvested restricted stock in our deferred compensation plan and (v) our previously outstanding warrant, and our diluted net loss per share is the same as our basic net loss per share.

The following table presents the weighted-average number of potentially dilutive securities that were excluded from our calculation of diluted net loss per share, in thousands:

 

 

Because the market conditions for the PRSUs were not satisfied at June 30, 2016, and June 30, 2015, such securities are excluded from the table above.

 

 

10. Legal Proceedings

Beginning on September 20, 2010, a number of complaints were filed in the US District Court for the Southern District of California against us and certain of our current and former employees and directors on behalf of certain purchasers of our common stock. The complaints were brought as purported stockholder class actions, and, in general, include allegations that we and certain of

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our current and former employees and directors violated federal securities laws by making materially false and misleading statements regarding our BELVIQ program, thereby artificially inflating the price of our common stock. The plaintiffs sought unspecified monetary damages and other relief. On August 8, 2011, the Court consolidated the actions and appointed a lead plaintiff and lead counsel. On November 1, 2011, the lead plaintiff filed a consolidated amended complaint. On March 28, 2013, the Court dismissed the consolidated amended complaint without prejudice. On May 13, 2013, the lead plaintiff filed a second consolidated amended complaint. On November 5, 2013, the Court dismissed the second consolidated amended complaint without prejudice as to all parties except for Robert E. Hoffman, who was dismissed from the action with prejudice. On November 27, 2013, the lead plaintiff filed a motion for leave to amend the second consolidated amended complaint. On March 20, 2014, the Court denied plaintiff’s motion and dismissed the second consolidated amended complaint with prejudice. On April 18, 2014, the lead plaintiff filed a notice of appeal, and on August 27, 2014, the lead plaintiff filed his appellate brief in the US Court of Appeals for the Ninth Circuit. On October 24, 2014, we filed our answering brief in response to the lead plaintiff’s appeal. On December 5, 2014, the lead plaintiff filed his reply brief. A panel of the US Court of Appeals for the Ninth Circuit heard oral argument on the appeal on May 4, 2016. Due to the stage of these proceedings, we are not able to predict or reasonably estimate the ultimate outcome or possible losses relating to these claims.

 

 

11. Restructuring Charges

In October 2015, we committed to a reduction in our US workforce of approximately 35%, or approximately 80 employees, which we substantially completed by December 31, 2015. In November 2015, we committed to a reduction in our Swiss workforce of approximately 17%, or approximately 14 employees, which we substantially completed by the second quarter of 2016. As a result of these workforce reductions, we recorded a restructuring charge in the fourth quarter of 2015 for termination benefits of $4.0 million, and at June 30, 2016, all of this charge has been paid.

In June 2016, we committed to a reduction in our US workforce of approximately 73%, or approximately 100 employees, which we plan to substantially complete by August 31, 2016. As a result of this workforce reduction, we recorded estimated restructuring charges during the second quarter of 2016 of $6.1 million in connection with one-time employee termination costs, including severance and other benefits. Included within this amount is non-cash, share-based compensation expense of $1.0 million related to the accelerated vesting of stock options and the extension of the exercise period of vested options for employees impacted by the workforce reduction.

 

 

12. Management Changes

Appointment of President and Chief Executive Officer.

In May 2016, our Board of Directors appointed Amit Munshi as our President, Chief Executive Officer and interim principal financial officer, and he joined our Board of Directors in June 2016 following our 2016 Annual Stockholders’ Meeting. Harry F. Hixson, Jr., Ph.D., who served as our interim Chief Executive Officer and interim principal financial officer from October 2015 to May 2016, continues to serve on our Board of Directors.

In connection with Mr. Munshi’s appointment as an officer, our Board of Directors’ Compensation Committee approved an inducement stock option grant to Mr. Munshi to purchase 3,800,000 shares of our common stock under our 2013 Long-Term Incentive Plan, as amended in May 2016 to reserve an additional 3,800,000 shares of common stock for inducement awards. The nonstatutory stock options have a seven-year term and will vest over four years, with 25% of the shares subject to vesting one year after grant and the remainder of the shares vesting quarterly over the following three years in equal installments, subject to his continued service through the applicable vesting dates and possible acceleration in specified circumstances.

Termination of Chief Medical Officer.

In June 2016, our Board of Directors terminated without cause our Senior Vice President and Chief Medical Officer, William R. Shanahan, Jr., M.D., J.D. In connection with Dr. Shanahan’s termination, and in accordance with our Amended and Restated Severance Benefit Plan, as amended, we will provide him the following termination benefits: (1) a cash severance payment of approximately $0.5 million (subject to applicable withholdings); (2) continuation of health insurance coverage for a period of 12 months; (3) acceleration of the stock options and RSUs (other than PRSUs) held by Dr. Shanahan that would otherwise have vested through the 12-month period following the date of his termination, provided that, for purposes of calculating such vesting acceleration, any unvested portion of such equity awards that were scheduled to vest in annual installments are treated as if the original grant provided for vesting in equal monthly installments rather than annually; and (4) continued stock option exercisability until the later of (i) the original post-termination exercise period provided in the applicable stock option agreement or (ii) 12 months (but not beyond the original contractual life of the option). In addition, with respect to outstanding PRSUs, when our Board of Directors’ Compensation Committee determines our relative performance for an applicable performance period, a pro-rata portion of the relevant PRSUs held by Dr. Shanahan is eligible to vest (based on the percentage of the performance period that Dr. Shanahan provided

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service prior to his termination). The pro-rata vesting may be accelerated if we undergo a change in control before the scheduled end of the performance period.

We recorded a charge of $1.0 million in the second quarter of 2016 related to these benefits, including non-cash, share-based compensation expense of $0.4 million, which is included in research and development expense in our consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2016. As of June 30, 2016, there are remaining accruals for these benefits of $0.6 million included in accounts payable and other accrued expenses, the majority of which we expect to pay in the fourth quarter of 2016.

Appointment of Chief Financial Officer.

In June 2016, our Board of Directors appointed Kevin R. Lind as our Executive Vice President and Chief Financial Officer. In connection with such appointment, our Board’s Compensation Committee approved an inducement stock option grant to Mr. Lind to purchase 800,000 shares of our common stock under our 2013 Long-Term Incentive Plan, as amended in May 2016 and June 2016, to reserve an additional 800,000 shares of common stock for inducement awards in addition to the 3,800,000 shares it previously reserved for such awards. The nonstatutory stock options have a seven-year term and will vest over 4 years, with 25% of the shares subject to vesting one year after grant and the remainder of the shares vesting monthly over the following three years in equal installments, subject to his continued service through the applicable vesting dates and possible acceleration in specified circumstances.

 

 

13. Subsequent Events

In July 2016, the US Food and Drug Administration approved the New Drug Application for our once-daily formulation of lorcaserin for chronic weight management under the brand name BELVIQ XR. Eisai will pay us a $10.0 million milestone payment that is related to this achievement.

In July 2016, the Federal Commission for the Protection Against Sanitary Risk approved the Marketing Authorization Application in Mexico for our twice-daily formulation of lorcaserin for chronic weight management. The product will be sold under the brand name VENESPRI. Eisai will pay us a $1.0 million milestone payment that is related to this achievement.

In July 2016, we committed to a reduction of our manufacturing workforce in Zofingen, Switzerland of approximately 26%, or approximately 17 employees, which we plan to substantially complete by February 28, 2017. As a result of this workforce reduction, we estimate that we will incur restructuring charges, primarily in the third quarter of 2016, of approximately $0.3 million (a majority of which are cash expenditures) in connection with one-time employee termination costs, including severance and other benefits.

 

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

General

This discussion and analysis should be read in conjunction with our financial statements and notes thereto included in this quarterly report on Form 10-Q, or Quarterly Report, and the audited consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2015, or 2015 Annual Report, as filed with the Securities and Exchange Commission, or SEC. Operating results are not necessarily indicative of results that may occur in future periods.

This Quarterly Report includes forward-looking statements that involve a number of risks, uncertainties and assumptions. These forward-looking statements can generally be identified as such because the context of the statement will include words such as “may,” “will,” “intend,” “plan,” “believe,” “anticipate,” “expect,” “estimate,” “predict,” “potential,” “continue,” “likely,” or “opportunity,” the negative of these words or other similar words. Similarly, statements that describe our plans, strategies, intentions, expectations, objectives, goals or prospects and other statements that are not historical facts are also forward-looking statements. For such statements, we claim the protection of the Private Securities Litigation Reform Act of 1995. Readers of this Quarterly Report are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the time this Quarterly Report was filed with the SEC. These forward-looking statements are based largely on our expectations and projections about future events and future trends affecting our business, and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. These risks and uncertainties include, without limitation, the risk factors identified in our SEC reports, including this Quarterly Report. In addition, past financial or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate results or future period trends. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition. Except as required by law, we undertake no obligation to update publicly or revise our forward-looking statements.

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Use of “BELVIQ” in this Quarterly Report

Lorcaserin has been approved in the United States, South Korea and Mexico for weight management in a twice-a-day dosage formulation. The twice-a-day dosage formulation is being commercialized in the United States and South Korea under the brand name BELVIQ, and will be commercialized in Mexico under the brand name VENESPRI. Lorcaserin has also been approved in the United States in a once-a-day dosage formulation, which is BELVIQ XR.

In this document, “BELVIQ” refers to each of the formulations of lorcaserin approved for weight management, unless the context otherwise indicates.

OVERVIEW AND RECENT DEVELOPMENTS

We are a biopharmaceutical company focused on developing novel, small–molecule drugs across a range of therapeutic areas, and are currently directing our efforts and resources primarily on the following activities:

In July 2016, the US Food and Drug Administration, or FDA, approved the New Drug Application for our once-daily formulation of lorcaserin for chronic weight management under the brand name BELVIQ XR. Eisai will pay us a $10.0 million milestone payment that is related to this achievement. In July 2016, the Federal Commission for the Protection Against Sanitary Risk approved the Marketing Authorization Application in Mexico for our twice-daily formulation of lorcaserin for chronic weight management. The product will be sold under the brand name VENESPRI. Eisai will pay us a $1.0 million milestone payment that is related to this achievement.

In June 2016, we committed to a reduction of our US workforce of approximately 73%, or approximately 100 employees, which we plan to substantially complete by August 31, 2016. As a result of this workforce reduction, we recorded estimated restructuring charges during the second quarter of 2016 of $6.1 million in connection with one-time employee termination costs, including severance and other benefits. Included within this amount is non-cash, share-based compensation expense of $1.0 million related to the accelerated vesting of stock options and the extension of the exercise period of vested options for employees impacted by the workforce reduction. We estimate that the reduction will decrease annualized cash expenditures for (i) personnel by approximately $17 million and (ii) related other operating expenses between $6-8 million. In July 2016, we committed to a reduction of our manufacturing workforce in Zofingen, Switzerland of approximately 26%, or approximately 17 employees, which we plan to substantially complete by February 28, 2017. As a result of this workforce reduction, we estimate that we will incur restructuring charges, primarily in the third quarter of 2016, of approximately $0.3 million (a majority of which are cash expenditures) and that the reduction will decrease annualized cash expenditures by approximately $2.1 million.

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In May 2016, our Board of Directors appointed Amit Munshi as our President, Chief Executive Officer and interim principal financial officer, and he joined our Board of Directors in June 2016 following our 2016 Annual Stockholders’ Meeting. Harry F. Hixson, Jr., Ph.D., who served as our interim Chief Executive Officer and interim principal financial officer from October 2015 to May 2016, continues to serve on our Board of Directors. In addition, in June 2016, our Board of Directors appointed Kevin R. Lind as our Executive Vice President and Chief Financial Officer (as well as our principal financial officer). 

In general, developing drugs and obtaining marketing approval is a long, uncertain and expensive process, and our ability to execute on our plans and achieve our goals depends on numerous factors, many of which we do not control. To date, we have generated limited revenues from sales of BELVIQ and other sources. We expect to continue to incur substantial net losses for at least the short term as we advance our clinical development programs, support Eisai and our other collaborators, and manufacture BELVIQ for commercial sale and studies.

We expect our cash used in operations will be lower in 2016 as compared to 2015 due to cost savings from the workforce reductions we effected at the end of 2015 and in June of 2016 and by continuing to implement cost control measures. However, we will need to receive additional funds under our existing collaborative agreements, under any new collaborative agreements we may enter into in the future (including for one or more of our drug candidates or programs), or by raising additional funds through equity, debt or other financings. We will continue to monitor and evaluate the level of our expenditures, and may further adjust our expenditures based upon a variety of factors, such as our prioritization decisions, available cash, ability to obtain additional cash through collaborations and other sources, the results of our development and research programs, the timing and costs related to our clinical trials, nonclinical studies and regulatory decisions, as well as the economic environment.

Our US operations are located in San Diego, California. Our primary clinical operations are located in Zug, Switzerland, and our commercial manufacturing for BELVIQ is located in Zofingen, Switzerland.

We refer you to our previously filed SEC reports for a more complete discussion of certain of our recent developments.

RESULTS OF OPERATIONS

We are providing the following summary of our revenues, research and development expenses and general and administrative expenses to supplement the more detailed discussion below. The dollar values in the following tables are in millions.

Revenues

 

 

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Research and development expenses