Arena Pharmaceuticals, Inc. Earnings: What to Expect Thursday

Arena Pharmaceuticals (NASDAQ: ARNA  ) will release its quarterly report on Thursday, and investors are more nervous than ever about the prospects for the maker of obesity drug Belviq. With rival VIVUS (NASDAQ: VVUS  ) having reported another round of disappointing sales of its competing drug Qsymia, investors have had to deal with skeptics arguing that medical professionals might choose not to embrace any new obesity drugs. Moreover, as the bearish argument goes, new competition potentially coming soon from Orexigen Therapeutics (NASDAQ: OREX  ) and its Contrave drug could leave Arena with an even harder road to convince patients that Belviq is the obesity drug of choice.

For longtime Arena Pharmaceuticals shareholders, investing in the drugmaker has been a topsy-turvy experience. After getting rejected in 2010, Belviq finally delivered got FDA approval in 2012. Yet the huge sales that many investors had expected to materialize haven't yet appeared, and impatient investors point to VIVUS's poor results for Qsymia as fuel for their fears that Belviq might not take off either. Yet bullish investors remain convinced that Belviq has advantages over both Qsymia and Contrave that could allow it to emerge victorious. Let's take an early look at what's been happening with Arena Pharmaceuticals over the past quarter and what we're likely to see in its report.


Source: Images Money, Flickr.

Stats on Arena Pharmaceuticals

Analyst EPS Estimate

$0.02

Year-Ago EPS

($0.10)

Revenue Estimate

$35.54 million

Change From Year-Ago Revenue

1,736%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Arena Pharmaceuticals earnings keep growing?
In recent months, analysts have been slightly less enthusiastic about Arena earnings, cutting their fourth-quarter estimates in half. But they've held their full-year 2014 projections steady, and the stock has actually jumped 28% since mid-November.

Arena came into the quarter on a positive note, despite reporting lackluster sales of Belviq during the third quarter. Net product sales amounted to just over $2 million, but the news that cheered shareholders was Arena's decision to expand its marketing agreement with Japan's Eisai. Under the new agreement, Arena received $60 million in upfront cash, as well as the right to further regulatory and development milestone payments adding up to $176.5 million under certain circumstances. Arena also said it's entitled to as much as $1.56 billion in one-time purchase price adjustment payments depending on sales in the countries covered under the agreement, which includes all but five countries around the world. In addition, Eisai's efforts will include a doubling of Eisai's U.S. sales force to try to bolster sales of the obesity drug domestically as well.

So far, both Arena and VIVUS have worked hard to get their drugs in front of prospective patients. VIVUS announced a partnership with health-insurance company Aetna to make Qsymia more available to its members, while Arena and Eisai entered into a new agreement with CVS Caremark to boost the reach of Belviq across the U.S. in hopes of boosting sales. That's a crucial element to success, as many patients simply won't consider the drug if they can't get insurance coverage for it. Moreover, Eisai's worldwide scope has given Arena an advantage, with approval submissions in place in Brazil and Taiwan and with more likely coming in the near future.

Arena's relative success, at least against Qsymia, has helped the stock post some gains recently. Based on recent numbers from the two companies, Arena appears to have the upper hand in terms of number of prescriptions written during 2013, even though VIVUS put up aggressive promotional offers to spur demand.

Yet Arena could have a third obesity drug to compete against soon, as Orexigen submitted Contrave for FDA approval in December. With a six-month review period, Contrave could get approved by mid-year if the FDA agrees that final data from the company's safety trial of the drug don't create too large an increase in cardiovascular risk. Bulls argue that Belviq's head-start should make professionals more comfortable with it than with Contrave.

In the Arena earnings report, watch for the company to talk about its recent successes in its marketing efforts both in the key U.S. market and around the world. With so much potential, Arena would really disappoint its longtime advocates if the company can't make good on the profit opportunity that it has long promised from its obesity drug.

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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 February 26, 2014, at 2:02 AM, marp11 wrote:

    nervous Dan>>>??

    I'd say you bloggers and your short pals are the nervous ones,

    We ARNA long term investors are quite happy and looking forward to years of success with BELVIQ and that astounding PIPELINE.

    Cheers

  • Report this Comment On February 26, 2014, at 2:36 AM, biogemfinder wrote:

    Its interesting that these bloggers love to bring OREX and how it will compete with arena argument without for once mentioning that Qsymia and Contrve have the same issues - both are generic drugs with known toxicities. While we Arena longs (who seem to be the only intelligent people who have done their DD unlike the idiots in MF, and SA) against all odds have embraced Belviq and have been pointing out the fallacies in Qsymia and now Contrave. But HFs and their cronies continue to ignore facts and manufacture their own facts to distract and distort. However, truth will eventually win and so will Belviq. Sure we are disappointed that Belviq hasn't taken off with parabolic sales but the growth is slow but steady! Even if it maintains curent growth rate it will be a blockbuster in 2015 (1B in sales). Orex will travel the same path of qsymia, and of anything worse since clearly cardiovascular events are a real concern and that's why the FDA demanded Orex conduct the cvot trial before it would consider for approval. Worse still, orex hasn't disclosed what the actual cv evenst rates were in active arm vs placebo arm, except to say that the frequency of events in contrave arm are not as high as 2x compared to placebo. In other words if 10 out of 1000 people experience CV events in placebo, less than 20 out of 1000 in contrave arm had these events. FIne..it mets the criteria but does not mean that it is now magically safer than either qsymia or belviq. Its certainly worse than what was calculated to eb in Belviq arm. And if anyone remembers the debate about statistics in cv events during Belviq's adcom..contrave fans will be very disappointed...again. FDA may approve the drug with black box warning and with REMS in place. EU approval under these circumstances is very unlikley..because FDA may think it passed the muster that while dangerous not 2x dangerous than placebo, may be too much of a risk to take.

    If you buy and hold orex, the best time to sell may be right around the approval. and then short it and the 12-20 dollar orex will come down to $5 or less in 6 months after the approval!

  • Report this Comment On February 26, 2014, at 2:50 AM, marp11 wrote:

    good one fools

    and the stock has actually jumped 28% since mid-November......

    from 4.04 november 7 to 7

    i get a bit more then 28% but then,.,i use the truth

  • Report this Comment On February 26, 2014, at 5:08 AM, QTsai wrote:

    How do you know ARNA longs are nervous? How do you know Concave is approved? Has it been approved? OREX is a "con"cave just like Qsymia. Good luck to you and your shorts. Cheers.

  • Report this Comment On February 26, 2014, at 5:28 AM, bmc007 wrote:

    I agree with all the other comments to date. I'm an ARNA long and not worried at all. ARNA has what it takes and if it takes people that little bit longer to realise it then no worries. We'll get there when we get there. In the meantime, I'll just watch my percentage rise and rise and congratulate myself (and all other longs) on the quality of my DD right from the start. Sorry but the 'big boys' got it wrong this time. Score one for the 'little guys'.

  • Report this Comment On February 26, 2014, at 7:56 AM, sp500chartdotcom wrote:

    Earnings estimates are all over the map because nobody seems to know exactly how Arena will be booking the 60 million ROW upfront payment,

    If it all gets booked at once (it DOESN'T) then ARNA shows a profit of about 18 cents. If it gets booked over 10 years amortization (closer to reality) then Arena will lose roughly 6-8 cents.

    Last Q the columns were all talking about how the 60 million DEA milestone from Eisai is not really that big a deal because it is a one time cash infusion.

    OK. Let's see if they whistle the same tune tomorrow evening.

  • Report this Comment On February 26, 2014, at 8:39 AM, PAW57 wrote:

    Another nice hack job on Arena, Dan. As a longterm investor in biotech, I'm well aware of what it takes to move a stock. Arena's got an NCE serving an enormous need already on the market in the US with a couple others in the pipeline. They've also reached profitability while still early in Belviq's sales life. Off-shore low cost manufacturing. A strong partnership with Eisai. Impending approvals in foreign countries. There's a lot more to like here vs their so-called competition.

    Maybe you should stick to your knitting and hack up the financial/estate planning category?

  • Report this Comment On February 26, 2014, at 9:34 AM, marp11 wrote:

    poor dan a disgrace

  • Report this Comment On February 26, 2014, at 9:43 AM, OPC74 wrote:

    Dan... You forgot to mention a very important piece of information:

    You said this in the article:

    VIVUS announced a partnership with health-insurance company Aetna to make Qsymia more available to its members

    But you forgot to mention this very important piece of information...

    Recently, Aetna announced that it would offer BELVIQ as a preferred brand to eligible patients as part of its pilot program to self-insured plan sponsors. The Aetna program, which offers access to lifestyle management programs and surgical options, also will measure improvement in health outcomes, productivity and medical costs. (Feb 10, 2014)

  • Report this Comment On February 26, 2014, at 4:12 PM, marp11 wrote:

    dan is as beholden to his masters as osmelli

    but

    tomorrow after earnings and news

    they will slink back to the land of slime and we can smell our money

  • Report this Comment On February 26, 2014, at 5:47 PM, tunetopper wrote:

    Finally - maybe- the forces of darkness aligned against the shareholders of Arena can now turn their attention to bashing the likes of Aetna-- which means they have indeed lost. Here is how:

    To say that Arena is too expensive is now tantamount to saying that the health insurance companies are not smart enough to weigh the costs of the drug against the benefits of a healthier you.

  • Report this Comment On February 27, 2014, at 2:11 PM, marp11 wrote:

    Obesity Therapy Market to Reach $8.4 billion by 2022

    Due to the launches of several novel drugs during the next decade, the obesity market will increase from $407m in 2012 to $8.4 billion by 2022, at a Compound Annual Growth Rate (CAGR) of 35.3%, forecasts research and consulting firm The authors.

    The US, Canada and Japan will have the largest obesity therapy sales by 2022, with shares of $5.3 billion, $702m and $484m, respectively.

    The obesity space has seen little activity in the past decade due to a pharmacological history of modest efficacy, poor tolerability with dangerous side effects, and limited healthcare coverage, which have all contributed to the commercial failure of anti-obesity drugs.

    Recently, however, there has been a revival of this market space, as a couple of companies have released drugs that challenge these limitations.

    The two drugs that will have the greatest impact on the size of the market are Victoza and Belviq.

    Victoza's advantage, in addition to its efficacy, lies largely in the fact that it is marketed for the treatment of type 2 diabetes by Novo Nordisk. Belviq's advantage lies in its novelty; unlike Vivus' Qsymia and the two drugs being developed by Orexigen, it is a novel molecular entity, rather than a combination of existing therapeutic options.

    With the changing tide of opinion on the treatment of obesity and the upcoming launches of new drugs and devices, we anticipate that the prescribing of obesity therapies will increase over the next 10 years, boosting the market size, Wong says.

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