Arena Fans Spinning (And Altering) Belviq Prescription Data

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SAN DIEGO ( TheStreet) -- Arena Pharmaceuticals' ( ARNA) most ardent shareholders -- a group of retail investors known affectionately known as the Areniacs -- are unhappy with the early prescription numbers for the company's weight-loss pill Belviq, so they're making up their own numbers.

Doctors wrote 1,829 prescriptions for Belviq for the week ended June 21, a 68 percent increase over the 1,087 scripts written the week before, according to IMS Health.

Arena and its marketing partner Eisai began selling Belviq on June 11. It's hard to say much about two weeks of prescription data but that matters little to Arena's retail investors because they've brainwashed themselves into believing the marginally effective weight loss pill would be an instant blockbuster.

When Belviq weekly scripts didn't double, triple or even quadruple this week, as they expected (unrealistically), the Areniacs blamed IMS, short sellers and anyone or anything other than the drug or themselves.

"Because IMS data is only 73% accurate, I adjusted it to estimate actual number of scripts and based my analysis on the adjusted number," writes "Reasonable Risk," in a Seeking Alpha column Monday titled Improper Analysis of Belviq's IMS Prescription Data Causes A 9% Sell-Off Of Arena On Good News.

"Reasonable Risk" doesn't explain how he reached the conclusion that IMS reporting of weekly Belviq prescription is only 73 percent accurate. It's true that IMS weekly prescription data are rarely 100 percent accurate so require adjustments, but two weeks of data is not enough to calculate an error rate. The anonymous author of the Seeking Alpha article starts with the conclusion that Belviq's early launch must be going great, so if actually reported IMS data aren't supportive, "adjust" the data to make them look better.

Unfortunately, even his adjusted analysis of Belviq scripts isn't looking too hot:

"A linear growth rate based on the second week's 501 scripts per workday suggests pharmacies will fill about 9,000 scripts the first month. Although that is about 30% below my predicted initial estimate, two data points are inadequate for making predictions," he writes. Emphasis mine.

Are two weeks of Belviq prescriptions numbers adequate or not? "Reasonable Risk" can't seem to make up his mind.

With Belviq not launching until June 11, second-quarter's reported sales will only reflect wholesaler stocking and not true patient demand, notes Credit Suisse analyst Ravi Mehrota in a research note.

"But Q3 matters, as does TRx data into the quarter, and TRx will need to meaningfully accelerated to meet the quarter," Mehrota adds. "Q3 would seem to need a TRx of at least around 190,000 for the entire quarter, or an average of around 15,000 TRx per week in the quarter."

Areniacs are also trying to calm their frazzled nerves by comparing initial Belviq weekly scripts to those recorded by Vivus ( VVUS) when it launched Qsymia last year. Again, this is a mistake because of the different ways in which the competing weight-loss pills hit the market. Until this week, Qsymia distribution was restricted to mail-order pharmacies while Belviq was launched immediately through retail pharmacies. Vivus also didn't offer free drug samples while Arena and Eisai are.

It's no surprise, then, that on a numeric basis, the early Belviq script numbers are higher than what Qsymia achieved in its first few weeks on the market.

What will mattter more for Belviq is what happens to demand once patients are no longer receiving free or discounted drug. With a middling 3 percent, placebo-adjusted weight loss and more than 50 percent of patients failing to lose 5% of their baseline weight at 12 weeks in the drug's pivotal clinical trials, the real concern is that a lot of obese patients won't be taking Belviq for very long, especially if they're forced to pay full price without insurance reimbursement.

Areniacs whine constantly about market manipulation and "trapped" shorts, but in reality, the short thesis on Arena has not changed appreciably since Belviq was approved. The drug doesn't work very well and it's expensive. Sales will disappoint, particularly relative to Arena's already lofty valuation.

It will take a lot more than two weeks of Belviq prescription data to prove the short thesis right or wrong.

-- Reported by Adam Feuerstein in Boston.

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.