Arena Expands Marketing Of Obesity Drug To Help Shrink Waistlines

Chris Lau, Kapitall: Arena and a partner will expand marketing efforts for a weight loss drug, but is there more room to grow?

Shares in Arena Pharmaceuticals (ARNA) soared after the company extended its agreement with its partner Eisai for the company's weight loss drug Belviq. Bearishness had continued to build in its shares with short float of around 26%. The stock recently hit a new low at $4.05. Should investors expect the 17% rally on November 8 to hold?

Losses narrow

Arena reported a loss of $0.08 per share, which beat consensus by $0.04 per share. Revenue was $3.6 million. In its quarterly report, Arena said it would double its sales force to 400 representatives by this December.

[Read more on Healthcare from Kapitall: Biotech Stocks Climb and Fall on Catalysts in 2013]

This will widen the reach to physicians in the US by 65,000. Advertising was also launched last quarter directly to the consumer. And marketing partner Eisai included a 15-day free trial voucher for Belviq.
  • 31.5% of product sales, or $1.7M, was recognized in Q3.
  • R&D expenses rose to a healthy $14.59 million, up from $11.6 million last year.
  • Cash also rose to $180.7 million, up from $156.09 million last year.

Expanded agreement

In return for $60 million upfront and an additional maximum $176.6 million in milestone payments, plus up to $1.56 billion in adjustment payments to Arena, Eisai will get worldwide commercialization rights. The rights would exclude South Korea, Taiwan, Australia, Israel, and New Zealand.

Competitor struggles

Vivus (VVUS), whose Qsymia obesity drug competes with Belviq, reported a weak quarter. The company lost $0.48 per share on revenue of $27.4 million. Qsymia sales totaled $6.4 million in the quarter. In response to the weak quarter, Vivus will cut its workforce by 20 employees (17%) to reduce expenses. The termination costs will be recognized next quarter and will be included in the up to $8 million costs.

Click on the interactive chart to see data over time. 

Analysis 

Arena continues to look to the long term. The company is increasing its sales force steadily, and taking its time to win acceptance from major players: physicians, consumers, and insurance companies. If successful, Belviq could be the top choice for obesity treatment in the US.

The potential side benefits of Belviq in reducing smoking cravings and in diabetes could also mean the drug reaches a wider patient base. Arena is investigating this possibility, and you can imagine its competitors will too.

 

(Written by Chris Lau, a Kapitall Writer. Disclosure: Author is long ARNA.)

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