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.


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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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