Before saying anything else, I need to point out that it is still quite early in the game. Often success or failure of a drug, when it comes to Wall Street, is not whether or not it actually helps people, but rather whether or not it is selling strongly enough to help the bottom line. If you are invested in Arena (ARNA), it is sometimes more prudent to separate your passion for the product from your thought process about Arena as an investment. While 5 weeks of sales does not determine the long term, it is enough to begin to extrapolate the general trajectory. Arena is down about 3% in pre-market trading based on prescription numbers for the week of July 12, 2013.
As Arena and Eisai (ESALF.PK) launched Belviq they spoke to $150 million in sales. Right now that is the only company sourced "guidance" that really exists for investors to consider. With that in mind I have identified that 750,000 scripts need to be sold to attain that goal. I modeled two distinct paths to get to that point. One is a more straight line path, and the other is what we call a hockey stick trajectory. As I chart the weekly data it is important for the adjusted sales to be above at least one of these paths to have a viable chance of getting to the desired goal of $150 million in sales.
Prescription data comes primarily from two sources. IMS Health and Symphony Health both tabulate and extrapolate sales estimates. Neither offers an exact figure. In my model I use IMS data because it tends to hit the street first. Symphony data tends to report slightly higher than IMS. I apply a 30% adjustment to IMS data and a 20% adjustment to Symphony. These adjustments account for things like pharmacies that do not share data or scripts that are written for multiple months.
The IMS sales data for the week of July 12th on Arena's anti-obesity drug Belviq was 2,493. My adjusted total for the week is 3,241. Belviq sales are tracking just above the hockey stick model in my chart. The straight line model that I outlined for reaching $150 million by December 31st is likely not a path that will happen at this point, putting greater importance on the actual sales trend staying at or above the hockey stick model. That means that as each week passes we will need to see exponential growth ramping up.
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While it may be difficult to see, the orange line that represents actual sales is tracking just on top of the hockey stick path. The pace of the Arena launch may not be as fast as many had hoped for, but it is still showing a possible path to $150 million in sales in 30 weeks.
One reason that this week's prescription numbers might appear weaker than some anticipated is that "churn" is now starting to come into play. Churn would essentially be a patient that bought a prescription and is now at the point of whether or not to refill it. Patients that do not respond to the drug, finances, or any number of factors could result in a patient dropping off of a prescription. Essentially at this point, and moving forward, drop-outs come into play.
One comparison that investors in the sector may want to look at is how the Belviq launch compares to the launch of a competitor. Vivus (VVUS) makes and distributes the anti-obesity drug Qsymia. Qsymia had a very poor launch and has never seen a hockey stick model develop. Instead it has taken a more paced and traditional stepped approach. You can see that Belviq is outpacing Qsymia each week. A few notable items are that when Qsymia launched Belviq was not on the market yet, and that early Qsymia numbers were sold at full price. Qsymia did not offer discounts until week 12. Belviq had discounts upon launch.
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In summary, the sales launch of Belviq is maintaining traction. The drug is not setting any records, and will continue to be sensitive to the perception of the street. It will take compelling moves in weekly script data to silence its critics. What we seem to have here is a pace that is high enough to demonstrate hope and potential, but not high enough to remove fear and doubt. At the moment Arena remains in a range that favors active swing traders playing on the perception of the moment. Long term there is potential here. Many factors, such as insurance coverage, are gaining more importance as it appears that the drug alone, regardless of price, is not generating immediate buzz just yet. Bear in mind that things can change quickly. Stay Tuned.
Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I have no position in Vivus
