This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Arena Pharma Sinks Under Weight Of Vivus' Troubles

SAN DIEGO (TheStreet) -- Jefferies analyst Thomas Wei is still an Arena Pharmaceuticals (ARNA) bull, just not as much after slashing his sales forecast for the yet-to-be-launched obesity pill Belviq. Here's what Wei writes Wednesday:

We remain confident in the long-term potential for Belviq based on combination use with phentermine, but we are lowering our PT from $20 to $14, as we moderate our launch expectations for Belviq monotherapy following disappointing sales for competitor Qsymia.

"Moderate." That's sell-side analyst speak for, "Oh my god, my old forecast is so wrong."

Wei's "moderated" guess for Belviq sales in 2013 is now $35 million, down from $115 million. That's 70% "moderation" to his estimate, by the way.

In 2015, Wei now projects Belviq sales of $365 million, down from $700 million.

Vivus' (VVUS) poor third-quarter financial report and honest (but generally downbeat) assessment of the challenges facing peddlers of new obesity pills has analysts and some investors in re-assessment mode.

Credit Suisse analyst Lee Kalowski was actually ahead of his peers warning about Vivus' slow Qsymia launch but he, too, had more cutting to do Wednesday. His new Qsymia 2013 sales forecast is $88 million, down from $165 million. He's not much more optimistic about Arena and Belviq:

We have updated our model, though we leave Belviq revenue forecasts unchanged, resulting in higher launch forecasts for Belviq relative to Qsymia. Belviq will have no REMS and will be available at the retail channel, but we are concerned that Eisai is launching Belviq initially with (a) an equally under-sized field force and (b) weaker monotherapy efficacy that leaves it positioned somewhat awkwardly in the market. Combination trial data is unlikely until at least 2015, which will prove too late if the initial launch underwhelms. Belviq's monotherapy response rate is around 40%, which could hinder the uptake of repeat use -- if the product is used in a similar manner as Qsymia, with many physicians putting only a few patients on the product at a time. Despite having split economics on Belviq, ARNA now trades at a substantial premium to VVUS.

The most worrisome disclosure by Vivus Tuesday was the fact that 30% of patients willing to try Qsymia and who get actually get a prescription from their doctor are not following through because the drug costs too much out of pocket. [Insurance coverage for the drug is only 20% currently, not the 50%-plus estimated by third-party research firms.] This trend is not a friend for Belviq, which is much less effective.

J.P. Morgan analyst Cory Kasimov writes Wednesday:

The [Arena] conference call was relatively uneventful in terms of providing additional details on the launch plans for Belviq (obesity). However, we see few signs that the early launch of Belviq will avoid the problems VVUS is currently experiencing with its weight loss drug, Qsymia (including slow uptake and a meaningful number of ptatients not filling their prescription due to a relatively high out-of-pocket cost). In fact, Belviq could well experience a more lackluster launch vs. Qsymia given the drug's more modest efficacy. These potential issues combined with minority economics currently prevent us from being more constructive on the name at this valuation.

Kasimov forecasts 2013 Belviq U.S. sales of $74 million growing to $481 million in 2016 - in other words, no blockbuster, particularly since Arena only gets approximately one-third of the drug's economics, the rest going to Eisai.

If you haven't already, read TheStreet contributor Nate Sadeghi's take on Arena and Vivus. The headline says it all, Arena Pharma Is Still A Good Short.

-- Reported by Adam Feuerstein in Boston.

Stock quotes in this article: ARNA, VVUS 
Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,501.65 0.00 0.00%
S&P 500 1,878.61 +3.22 0.17%
NASDAQ 4,148.3380 +21.3710 0.52%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs