Arena Pharmaceuticals' Slow 2013

A review of Arena Pharmaceuticals' (NASDAQ: ARNA  ) 2013 might as well skip the first half of the year because basically nothing happened until midyear.

The biotech's obesity drug, Belviq, was approved by the Food and Drug Administration back in June 2012, but Arena's marketing partner Eisai couldn't launch the drug until the Drug Enforcement Agency made a final ruling on the schedule for the drug.

Controlled substance schedules range from Schedule I to Schedule V. Schedule I are illegal drugs, with the most abusive prescription drugs starting at Schedule II. Belviq is way down at Schedule IV with drugs like anxiety medications that have almost no restrictions and, besides a little extra paperwork, don't affect sales and marketing. I have no idea why it took a year for the DEA to make up its mind about the schedule for the drug, but there was nothing Eisai could do until the agency made its final ruling.

Not that it mattered much
Arena and Eiasi's closest competitor, VIVUS' (NASDAQ: VVUS  ) Qsymia, was launched shortly after being approved in 2012 because it didn't have to wait for the DEA. Typically, the first drug on the market gets the spoils but not in the obesity market. Doctors have been slow to prescribe the new obesity medication.

Drug

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Qsymia Sales (in Millions)

$0.041

$2.0

$4.1

$5.5

$6.4

Belviq Sales (in Millions)

N/A

N/A

N/A

$4.1

$5.4

Source: Company press releases.

While headed in the right direction, both drugs are a long way away from being blockbusters. Heck, they're a ways away from covering the companies' expenses.

VIVUS and Eisai have two fundamental challenges to getting decent sales for their obesity drugs. They've got to convince doctors that the benefits outweigh the risks. It's been hard to get past memories of fen-phen and Meridia, which were both pulled from the market. Prescribing diet and exercise, while not particularly efficacious given the lack of follow-through, doesn't have any unknown side effects.

The companies have also struggled with gaining reimbursement for the drug. In the meantime, they've given deep discounts on the drugs, which hamper the net sales numbers above. Not only will the number of lives covered by insurance be essential to growing sales, but the tier that their drugs are assigned to will be equally important. It's a lot easier to get patients to stick with tier 2 drug with a $10 to $20 copay than a tier 3 drug that typically come with copays in the $50 range.

More competition
Looking forward, Arena Pharmaceuticals is likely to get more competition next year from Orexigen's (NASDAQ: OREX  ) Contrave, but I don't see that as a major problem and could actually be a benefit in the short term. At this point, growing the entire obesity market is more important than a company getting the most sales. A third voice -- Orexigen's marketing partner Takeda -- talking about obesity drugs with doctors should help expand the market.

Put another way, which would you rather have? An entire $47 million market (based on the third-quarter run rate) or a third of a market that's in the billions?

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Read/Post Comments (7) | Recommend This Article (1)

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 December 07, 2013, at 4:07 AM, marp11 wrote:

    heck,,,,ARNA wont be turing a profit for 3 more quarters,

    HECK

  • Report this Comment On December 07, 2013, at 4:17 AM, marp11 wrote:

    based on current scrips trends,,,BELVIQ will be over 10k a week in mid-JAN,,,AND STILL GROWING WEEKLY.

    Q CRAP is on 10k since july

    bel/phen will top 100k a week. call us then

    BRIAN

  • Report this Comment On December 07, 2013, at 4:18 AM, marp11 wrote:

    look ON TV FOR BELVIQ ANY DAY NOW,,,BRIAN.....

  • Report this Comment On December 07, 2013, at 4:45 AM, marp11 wrote:

    "2014 should be a great year for Arena"

    BELVIQ will be a mega-blockbuster

    1st line treatment for obesity

    2nd line treatment for diabetes

    3rd line treatment for nicotine addiction

    Arena's pipeline is exceptional

    Long-term share price $ 50

    WITH 268 MILLION IN CASH....AND 1.57 BILLION DUE....

    EOM

  • Report this Comment On December 07, 2013, at 8:18 AM, marp11 wrote:

    ARNA gets more in milestones...145 MILLION ALREADY...then VVUS could make in 100 years.

    OREX??? 2 more generics?? stock crumbling....

    keep bashing orsmelli

  • Report this Comment On December 07, 2013, at 10:11 AM, marp11 wrote:

    slow 2013,,,,well since BELVIQ was only launched JUNE 7TH.....

    lets check back in 54 weeks ok??ok???

    orsmelli?????

    your masters should be broke by then

  • Report this Comment On December 09, 2013, at 6:53 AM, AreaRich wrote:

    Time to get the "hoe" out of the shed to dig up dirt for the options players, right Brian

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