Arena (ARNA) will be hosting its quarterly conference call on May 2, 2013 after the market closes. It was anticipated that the Arena anti-obesity drug, Belviq, would have already launched by now, so while the importance of this quarterly report may now be ho-hum, there are some things that the company should spell out for investors.
Arena needs to put an end to the speculation side of the business when it conducts its conference call. The anticipation of final scheduling from the DEA, which would allow Belviq to launch in the U.S., combined with the status of Belviq in Europe have been speculative events that have gotten to the point of driving even the most ardent Arena investors over the edge. It has gotten to the point that conspiracy theories abound, and while Arena can likely not offer definitive answers, the company can certainly frame expectations such that some wild swings can be eliminated.
Active and savvy traders have enjoyed almost a year of making 10% to 20% on swings fueled by over exuberant investors trying to play the launch and European news one way or another. The virtual see-saw has allowed active traders to profit while shorts and longs alike get more frustrated with each passing week.
We will likely hear about the pipeline, the potential, and the fact that the company is awaiting decisions from the DEA as well as Europe. What we need to hear are some estimated timelines that set the stage rather than the wishy-washy timelines that seem to give both long and short bettors the fuel they need to propagate their respective agendas.
With competitor Vivus (VVUS) recently seeing some REMS restrictions relaxed, the anti-obesity sector is once again building to a fever pitch on estimates and guesstimates of just how successful an Arena launch of Belviq will be. Vivus did recently receive positive news in Europe for its ED drug Spedra. With the EU recommendation, that drug is about 2 months away from launch in Europe. Arena investors should take note of that fact, because even if Europe recommends approval of Belviq there will still be another 2 months after that recommendation prior to a possible launch in Europe. Arena has already stated that they anticipate the thumbs up or thumbs down in Europe some time in June or July, but investors seem quite keen on assigning hope month after month. Essentially, Arena needs to be crystal clear on its expectations to stop the swings that have taken this equity down to under $8.00.
There is no secret that the longer term story of Belviq has potential. Many investors are betting on that quite heavily. It is also no secret that competitor Vivus has had trouble selling its own anti-obesity drug that launched over 6 months ago. The performance of Qsymia has called into question the potential in the marketplace for prescription solutions. While there is potential to see a blockbuster emerge from this sector, the timing of that status needs to be defined as well. Arena would do well by investors if it would outline some projected sales goals and launch timing. Even good sales can hamper an equity if expectations are not properly framed. At this point Arena owes investors some meat and potatoes.
Another factor that Arena needs to get crystal clear on is the pipeline. There is some serious potential with Lorcaserin that goes beyond weight loss. The company needs to outline some potential timelines. There are investors that are eager to see $20 and even $30 per share based on their own assumptions. While that potential exists, the key is the timing. Investors seem to be quite impatient at this point and they are setting some lofty price goals that they expect to see sooner rather than later. This is again a situation where expectations could be getting too high for the good of the equity.
In my opinion it is time for Arena to go ahead and take the step from a speculative company to one based on performance, real timelines, and real revenue projections. The street can handle this transition if given the data and research to work with. Because there is no news regarding DEA scheduling or European approval, this looks to be a Ho-Hum call in the making. Arena can change that by setting some realistic expectations on timing and projections. It is better to create realistic expectations across the board than to let the wild speculators on the long and short fringe define this company. Stay tuned and watch the volume on this equity closely.
Additional disclosure: I have no position in Vivus.