It's no secret that Wall Street has been betting heavily against Arena Pharmaceuticals (NASDAQ:ARNA)both before and after the Food and Drug Administration approved the company's fat-fighting pill, Belviq. The investing thesis is simple and to the point: Belviq sales won't live up to their blockbuster hype. 

Roughly nine months into Belviq's launch, skeptics seem to be correct in their assessment of the drug's commercial potential. Specifically, Arena and marketing partner Eisai (NASDAQOTH:ESALY) reported that Belviq only garnered $8.4 million in first-quarter sales, falling well off the blockbuster path.

Despite these unimpressive sales numbers, short interest in Arena has actually been steadily falling, although shorts still hold a whopping 21% of the float. With that in mind, let's look at three reasons why Wall Street is backing off of its bearish bet against this mid-cap biotech. 

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Reason No. 1
Despite the drug's lackluster sales numbers, Eisai is stepping up its promotional efforts for Belviq and there are signs that it's making progress. Per the first-quarter earnings release, Eisai has made significant headway in expanding insurance coverage for Belviq, which may go a long way toward increasing sales. Many patients had to pay out of pocket when the drug first hit the market, so more insurance coverage should be a boon for them and for sales.

Additionally, Eisai has launched national television ads that should increase awareness of the drug in its intended target market. With many physicians hesitant to prescribe obesity medications due to their history of problematic side effects, I think it's critical for the two companies to focus on a bottom-up approach when it comes to marketing. 

Finally, Eisai is adding 200 more sales reps to support educational efforts targeting doctors and obesity specialists. In sum, Belviq's sales could pick up in subsequent quarters due to these promotional efforts, which might be cause for concern among short-sellers. Time will tell.

Reason No. 2
Unlike many of the other most-shorted biotechs, Arena Pharmaceuticals has an active research pipeline centering around its G-protein coupled-receptor platform that was validated by Belviq's approval. Moreover, Arena and Eisai are making a concerted effort to expand Belviq's label, with a midstage trial for smoking cessation now under way. In other words, Arena isn't a one-trick pony.  

Keeping with this idea, investors should pay special attention to the development of a lorcaserin (Belviq) phentermine combo pill. Such a combo could dramatically improve weight loss and hence demand for the product. To date, Eisai has completed a 12-week pilot study focusing on the combo's safety profile. 

Reason No. 3
Perhaps one main reason shorts are backing off of Arena is that it is financially stable, with $256.5 million in cash at the end of the first quarter. Although the vast majority of this cash came in the form of milestone payments from Eisai, and not from Belviq sales, the company's shares are presently trading at roughly five times its cash position. And with many of Belviq's clinical activities funded mostly by Eisai, Arena shouldn't need to raise additional cash anytime soon. 

Foolish wrap-up
A near-21% short interest is nothing to take lightly as an investor long the stock. That said, Arena's short interest has come down dramatically from where it was at the start of the year. Arena's institutional ownership has also risen substantially following Belviq's approval. Prior to FDA approval, Arena sported an institutional ownership in the low 30% range. It has edged up close to 50% in recent months. 

Looking ahead, I don't see any clear-cut drivers for top-line growth for Arena, unless Belviq sales pick up in a big way. Even so, I also don't see any major downside catalysts for the company, which could be the biggest reason of all why shorts are apparently losing interest in this stock.