Is Arena's Belviq Priced Right?

| About: Arena Pharmaceuticals, (ARNA)

Arena (NASDAQ:ARNA) has disclosed that the wholesale price for its anti-obesity drug Belviq is $199.50 for a 60 count bottle (a 1 month supply). This would imply that the retail price will come in at something higher, perhaps between $225 and $250 per month. Is this product priced correctly for the market? Time, and experience will tell.

When Arena competitor Vivus (NASDAQ:VVUS) launched its anti-obesity drug last Fall the company did not seem to get a warm reception. With anything, cost is an issue, and with insurance coverage still spotty, consumers may be carrying the burden of the cost in many cases.

In an effort to spike up demand and acceptance Vivus launched a free trial period that equated to about a two weeks' supply. This brought the consumer cost down to about $150 per month, a perceived sweet spot in pricing. It also caused a surge in the number of prescriptions written for Qsymia.

Out of the gate it appears that treatment with Qsymia is less expensive.

The wholesale price of Qsymia for a 30-day supply:

  • Low dose (3.75 mg phentermine/23 mg topiramate) -- $120.00
  • Recommended dose (7.5 mg/46 mg) -- $135.62
  • Three-quarter dose (11.25 mg/69 mg) -- $162.74
  • Top dose (15 mg/92 mg) -- $183.90

Essentially the two week trial, a dose up to regular treatment, took some of the sting out of the cost to patients. On an apples to apples comparison the wholesale price of the recommended dose of each product is about $136 for Qsymia and $200 for Belviq. That represents about a 40% premium for the Arena treatment vs. Vivus (VVUS).

There has been a lot of debate about efficacy, safety, REMS, and distribution. We can now add pricing to the list of debates that will be the new topic du jour. I find the pricing at $200 wholesale to be a great starting point for Arena's Belviq. The key here is to try to maximize revenue while not underselling itself. It is far easier to adjust a price downward if needed than to try to adjust a price upward.

For investors it will take time to see if Arena hit the correct pricing with the launch. Early official results will likely be made available sometime within the first month of launch, but sector channel checks will start to roll out after the first week. It is these early channel checks that investors as well as the company will have to react to.

There was a point in time that the cost of Arena's Belviq was compared to the price of a latte. At $3.33 per pill, the cost is below your average latte, but patients will need 2 pills per day, meaning that treatment comes in above the proverbial caffeinated beverage.

From an investor's standpoint a $200 wholesale price is wonderful news. It is now time to see if consumers will bite at the current price point. Investors should bear in mind that insurance coverage of these treatments is a hurdle for both Vivus and Arena. More and more companies are indeed covering these drugs, but there is still a lot of work to do.

Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have no position in Vivus.

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