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 (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 (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.

Conclusion
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.