Arena Pharmaceuticals (ARNA) has announced that the company will host its Q4 conference call on March 4, 2013 at 8:30 AM prior to the market opening. This is an important call in that the company should be on the cusp of, or perhaps have even just launched its anti-obesity drug Belviq. For investors this call is perhaps more about the U.S. launch of Belviq than anything else. While the financials of the company are indeed important, the long awaited Belviq launch should and will take center stage.
It is on this call that investors, and the company, will finally begin to address the real potential of sales and sales projections. I look for Arena to be cautiously optimistic and to reiterate that the Q1 results will include only a few weeks of Belviq sales figures.
I have been targeting March 4th or 5th as the probable launch date ever since the DEA announced proposed class IV scheduling of Belviq back in December of 2012. The date was arrived at by simply adding the 30 day period for comments to the 45 day period for responses and assuming that the DEA would waive the additional 30 day period that is typical for final scheduling to be assigned.
Quarterly calls are typically used to give investors insight into how well the company did in a specific quarter. The financial numbers and status of the company are a very important tool for investors in determining valuation. These calls are also a showcase of sorts where the company gets to offer up some forward looking statements about the direction that the company is headed in. With Arena this call will be more about the latter.
Investors need to bear in mind that Arena management is walking a fine line in what information it gives. Arena needs to manage expectations but at the same time give the Street and investors enough positives to maintain enthusiasm. It is no easy task, and subsequent to the Vivus (VVUS) launch of Qsymia that received a lukewarm reception vs. expectations, the task is even more difficult.
I look for Arena to be upbeat and positive about the Belviq launch while at the same time putting out some cautionary language about lofty expectations. I look for them to categorize the launch of Belviq as a process that takes time to build momentum. One aspect of this sector that stung Vivus was analyst "channel checks" reporting prescription numbers that differed from actuals. The difference can be substantial and while investors should understand that channel checks are not an exact science, the impact on the equity can happen quickly.
What To Watch For
Investors should have a strategy in place surrounding the launch of Belviq. If you do not already have one, you should develop one quickly. Watch for how bullish or cautious management is and how the Street reacts to this news. In my opinion the morning of the call will be coupled with a press release about the launch of Belviq. If this is the case, bear in mind that the pre-market action on the equity will not yet have heard what management has to say.
The language in a launch press release will typically be very positive and very bullish. The key is to understand that until management is heard, there will be a ton of speculation happening. Usually the financial data is released just prior to the call and that is when we begin to see the real reaction of the Street. That may not be the case here. What the Street is looking for is not information about last quarter, but instead some additional flavor on Belviq.
It would be a good idea to monitor the pre-market action as company management takes the stage and begins to speak. You should see some instant action of the equity as the call progresses. Remember that at this point most of the action will be speculation more than anything else. The real sentiment on how the Street reacts to this call and any Belviq news will show itself about an hour or two after the call when the proverbial dust begins to settle.
Long-term holders will most likely be content to sit back and watch while active traders jockey for position. There may be a blush of color added to the European approval process, but I do not look for that to carry any real impact on the trading that will transpire on earnings day.
The other important factor to watch actually happens today, February 25th at 4:30 PM EST. That will be the Vivus quarterly call. Investors in the sector will want to pay close attention to the sales figures for the Vivus anti-obesity drug Qsymia.
If you are invested in this sector you have a busy week ahead of you. Pay attention.
Additional disclosure: I have no position in Vivus