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A Drug That's Ready to Lose

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The obesity drug battle was the most hotly contested pipeline race last year. But the sluggish initial sales of VIVUS' (NASDAQ: VVUS  ) Qsymia revealed the tricky nature of the weight loss market. Now Arena Pharmaceuticals  (NASDAQ: ARNA  )  is gearing up to launch Belviq, which was approved first but held up in regulatory procedures.

Does Belviq stand a better chance at the blockbuster status that fueled investment dreams?

Launch details
Belviq was delayed by Drug Enforcement Agency scheduling -- a process that's nearly complete.

DEA scheduling involves several steps and can be lengthy. A proposed schedule IV designation for Belviq appeared in the Federal Register on Dec. 19, and a 30-day public comment period followed. The DEA takes these comments into consideration before finalizing the designation. While this process nears completion, Arena and partner Eisai are getting Belviq ready to go. In their most recent earnings call, Arena estimated that Belviq would hit the U.S. market in the first quarter of this year.

What will the launch mean to the Arena-Eisai deal financials?  

Arena will have received around $150 million in payments from Eisai prior to launch, which includes $65 million following the DEA scheduling. The post-market agreement has Arena selling the product to Eisai for a percentage of net sales, with that percentage increasing from 31.5% to 36.5% depending on the amount of sales. Arena can receive an additional $1.2 billion as a purchase price adjustment.

Initial sales prediction
Predicting this market falls into the category of fool's (small "f") errand.

I've previously mentioned that it wouldn't matter which drug was first out of the gate. The prescribing instructions for both Belviq and Qsymia advise patients to discontinue treatment if a certain percentage of weight loss isn't achieved within 12 weeks.

Belviq will have an easier time getting to patients, but that's partly because of timing. Insurers already started coming aboard for Qsymia, and prescription rates grew. Belviq has a sales advantage since it lacks the Risk Evaluation and Mitigation Strategy  Qsymia was assigned, which restricted Qsymia to mail-order pharmacies.

Don't forget...
Orexigen (NASDAQ: OREX  )  is still on deck with its leading obesity drug Contrave. Approval depends heavily on the Light Study cardiovascular light safety trial. But the FDA's willingness to accept those results after the review begins is another sign of the agency lightening up on obesity treatments.

Foolish final thoughts
There are three certain things in life: death, taxes, and investor arguments over which obesity drug will win. Patients will likely take time in finding the treatment that works the best based on individual needs. If the Qsymia launch taught us any lesson, it's that this market will define itself over time.

The potential market for obesity drugs is massive, but so are the risks. If you're looking for more information on the top two obesity drug players, grab copies of our premium research reports on Arena Pharmaceuticals and VIVUS today. In the reports, our senior biotech analyst, Brian Orelli, Ph.D., breaks down each company's strengths and weaknesses, and explains the critical issues you need to know about. News in this space moves fast, so both reports come with a full year of updates. Click now for exclusive information on Arena and VIVUS.

Read/Post Comments (7) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 02, 2013, at 10:13 AM, RSRdriver wrote:

    Anyone who has read the most recent Arena financial report can see which drug is ready to lose!

  • Report this Comment On March 02, 2013, at 10:25 AM, gazoo99 wrote:

    That's right RSRdriver......

    VVUS.... they haven't got enough cash left at current burn rates to make it though the year!

    ARNA is just about to fill their coffers FULL of cash!

    To start $65 Million at launch from Eisai!

    Then the cash from sales..... which by the way will be much larber than VVUS's "pathetic" $2 Million last quarter that cost $58 Million to produce. There's some good numbers for ROI huh?

  • Report this Comment On March 02, 2013, at 10:25 AM, bwyatt25 wrote:

    Surely you mean Vivus? Arena not due to announce until next week.

  • Report this Comment On March 02, 2013, at 11:36 AM, RSRdriver wrote:

    Not sure what Areniac Chapter in the world your attached to but, here in the U.S., insurance companies ALWAYS go with the cheapest and MOST EFFECTIVE drug!

    Keep trying.

  • Report this Comment On March 02, 2013, at 11:41 AM, bhasa04 wrote:
  • Report this Comment On March 02, 2013, at 1:31 PM, bhasa04 wrote:

    VVUS down from 30 to 10, next stop is 8 and below ARNA PPS

  • Report this Comment On March 03, 2013, at 12:23 PM, biogemfinder wrote:

    First you cannot invest 401k MONEY Pretty close and glad I did. Its good that this world is divided between the shorts and their gurus who predict and analyze biotech stocks with degrees in political science, and those of us who actually work in the biotech industry, have experience in drug research and also happen to have invested in the sector with some success. This is where the real advantage comes to play when ws thugs make the wrong bet and keep believing that they were right even though at every single instance of prediction they have been proven wrong from adcom meeting, to DEA scheduling. Now their final line of defense is well VVUS is not selling therefore Arena's belviq won't...based on what????

    Numbers will speak and we will soon see what happens...but to respond to any positive article with your baseless bashing is pretty pathetic and tiresome.

    FYI, yes good portion of my holding is pre Adcom when adumb freakinstein was telling everyone to short this stock. When the stock dipped below 8 I doubled down..sold my other holdings and added more. I am happy and proud. The game is not over and if you want to make fun of my 401K invested in

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