Arena Pharmaceuticals Is Poised for Success

There are many undervalued biotech stocks in the stock market. A little due diligence, and you can find ones that have been beaten down by investors. Not because the company has no value, but because it is perceived as a poor stock not behaving properly.

One such biotech stock that we are talking about is Arena Pharmaceuticals (NASDAQ: ARNA  ) , which had its obesity drug Belviq approved  by the FDA back on June 27, 2012. Belviq was the first FDA-approved obesity drug in more than 13 years. The stock price of Arena had reached as high as $11 per share, upon that approval. It has since come down a lot in price, but we think that has a lot to do with expectations of prescription sales.

Belviq on the Market
A lot of analysts estimate that peak sales for Belviq could possibly reach around $1 billion. Although that won't happen for some time, it is dependent on the number of prescription sales increase per week. As with the problem of the price point per bottle at $199, it is not clear how well the drug will sell on the market. There's also the fact that most health plans don't yet cover Belviq under their policy (over time, this should improve). I think that it will take a long time for Arena to achieve its true value.

One thing, though, is certain -- Eisai (ESALY.PK) will keep up the marketing efforts for Belviq. This is not just talk of Eisai backing Arena on Belviq sales. Eisai is proving it for real; they are doing this by wanting to double the amount of sales representatives to 400 by December 2013. The reason for wanting to do this is quite simple and logical. Eisai wants to reach out to as many physicians as possible to prescribe Belviq. The amount of physicians to be reached will be around 65,000 in the United States. I like to think that Arena is just getting started with Belviq out on the market. Belviq still has a long way to go, but with more marketing it should be in good shape.

Possible competition
There is one main competitor for Arena out on the market now, and that is VIVUS  (NASDAQ: VVUS  ) . The company had also received  FDA approval for its drug Qsymia, but it hasn't been well received on the market like Arena's Belviq. VIVUS, though, had a rough start on initial sales, and in the second quarter of 2013 had missed analyst estimates completely. Revenue for sales of Qsymia were expected to be around $12.76 million. Despite this estimate, VIVUS missed big time, coming in at only at $5.53 million. VIVUS is having its share of troubles, so I don't expect too much competition from this biotech going forward.

There is another contender for the obesity drug market: Orexigen Therapeutics (NASDAQ: OREX  ) . The company doesn't have any FDA approved drug on the market yet, but its time will soon be approaching. Orexigen is expected to file an NDA to the FDA before the end of 2013. The company has already filed a Marketing Authorization Application for Contrave to the European Medicines Agency. The good news for Orexigen is that it has already licensed North American commercial rights to Takeda Pharmaceuticals. So upon approval, the company should have no problem targeting patients here in the U.S.

We don't see too much competition coming from VIVUS. Orexigen, on the other hand, may prove to be a tough competitor, if the LIGHT study interim analysis pans out great. The downside though for Orexigen is that is not expected to reach the U.S. market until 2015. So that gives Arena plenty of time to ramp up marketing efforts with Eisai.Arena Pharmaceuticals has fallen drastically since approval, but I think that its market cap of $98214 million should be higher. It still has a long way to go, but it can do better with increased prescription sales per week. One analyst is expecting sales  for Belviq to reach around $157 million in 2014. VIVUS has had terrible sales with Qsymia, plus the company's new CEO stepped down due to health issues. Many VIVUS investors were expecting Zoosk to turn around Qsymia sales. Especially since Zoosk had been responsible for helping to launch a multibillion-dollar drug known as Crestor into the market.

Arena Pharmaceuticals is not for short-term traders. It is for long-term investors who see how big the obesity market is and the safety/efficacy that Belviq can provide. I think that long-term investors should check out Arena Pharmaceuticals for their portfolios.

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Read/Post Comments (9) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On October 29, 2013, at 4:59 PM, marpieslice09 wrote:

    the worm has finally turned

    arna will soar in the next 12 months

    shorts know it

  • Report this Comment On October 29, 2013, at 5:10 PM, Rennrunn wrote:

    I still like Arena, because the obesity market has just started. I think growth in the obesity market will happen over time. Plus the belviq compound can be also used for other indications. It's still a long term story!

  • Report this Comment On October 29, 2013, at 5:16 PM, RSRdriver wrote:

    Success where? Maybe on the Yahoo ARNA message board.

    Get real! Not you or any other quasi analyst is going

    change the barely "marginal" efficacy, the ridiculous cost or the fact that there is a much better and way cheaper alternative.

    Doctors have already been rejecting it in droves as the numbers are proving.

    Arena is going bankrupt at the present rate of cash burn within 1 year!

  • Report this Comment On October 29, 2013, at 5:20 PM, biogemfinder wrote:

    what happened to RSdribble? He will surely have something to say about arena or any article indicating any potential for belviq and arena. Market and the buyers are in show me mode..they will jump in if we have consistent and significant increases in script numbers.....

  • Report this Comment On October 29, 2013, at 5:21 PM, biogemfinder wrote:

    Just was I typing he showed up what a guess!!

  • Report this Comment On October 29, 2013, at 5:23 PM, biogemfinder wrote:

    Bankrupt?? Now that's funny because the available cash will drive them 2 years even if they have 0 in revenues. But who needs to convince the rsdribble..he already knows!!

  • Report this Comment On October 29, 2013, at 5:25 PM, keahou wrote:

    RSDriver, Why are you posting here? Are you a short? Must be an investor in the loser that is just a combo of 2 generic drugs that can be bought much cheaper.

  • Report this Comment On October 29, 2013, at 6:58 PM, AlanPithy wrote:

    Nobody will lose weight without trying but if you try it appears that Belviq helps a great deal. The fundamental flaw in the clinical trials for all these weight loss drugs is the amount of effort a person is willing to exert. If you give coach them well and encourage them to diet and exercise then both placebo and drug arm will do well. If you have a drug like Phentermine in your cocktail (like the VVUS drug does) then the speed given to the drug arm will give it an advantage even if you do not do a good job coaching the participants on diet and exercise.

    What makes Belviq extraordinary is that the weight loss effect is mainly in the mind. If you want to lose weight, Belviq helps reduce cravings and increase satiety. But it also has a fantastic metabolic influence as seen in the reduction of fasting glucose and blood A1C measurements. So not only will you lose weight if you try, even if you don't try you will see reduction in risk of diabetes which is the main concern with obesity after heart disease.

    They are currently testing this drug with Phentermine, to see if they can safely recreate the popular FenPhen drug that sold tens of millions of prescriptions a year. I suspect they will also run a trial to see how well this drug works to help diabetics come off more expensive and toxic drugs.

    With 20 million diabetics and 80 million borderline diabetics (half of whom will become diabetic by 2020 if they don't change ways), this is the drug the medical community has been waiting for. Don't just treat diabetes - prevent it!

    I believe this drug will begin to gain traction in 2014 and explode in 2015 and 2016, with shareholders getting great reward. Being able to buy in here at mid $4 price for long term hold (2 years) is an incredible opportunity. In 2 years I believe it will be trading above $20 and possibly quite a bit higher. I continue to add with every spare dime I can find.

  • Report this Comment On October 30, 2013, at 12:29 AM, Foreeverlong wrote:

    Belviq will be a success.

    The efficacy of Belviq is not even a question with placebo adjusted efficacy of 8 to 11%. The efficacy demonstrated in posts on are far above this.

    Arena has plenty of capital to move forward with Belviq and an excellent partner in Eisai.

    The DTC advertising program is successfully moving forward in major medical and general public periodicals. TV advertising will predictably follow during the holiday and post holiday seasons. In addition, Eisai has dramatically increased the number of sales people on the street, which will have a major and positive impact as time progresses.

    Shorts and institutions have been combining to manipulate the price of Arena to buy shares at the cheapest price. This game will come to an end soon, and the price will go up soon IMO.

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