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With the finalized DEA scheduling in hand, Arena Pharmaceuticals (ARNA) was likely a very eager participant in the Bank of America Merrill Lynch 2013 Health Care Conference. The company spoke on May 15th and outlined some launch information relating to anti-obesity drug Belviq as well as some of the projects in the pipeline. At the moment, the Street is anxious about the Belviq launch and its level of success. Beginning on June 7th, the launch date, investors will finally begin to see whether or not Belviq will meet expectations and take its place at the top of the prescription anti-obesity market. I encourage investors to view and listen the presentation.

Marketing partner Eisai (OTC:ESALY) has given some indication that it is targeting $200 million in sales between the launch and the end of March 2014. That would indicate a drug that is not yet blockbuster ($1 billion in 1 year), but past a level that would make Belviq a viable and meaningful contributor to the bottom line.

A big goal for Arena is to see sales hit $250 million in 1 year. If that happens, Arena would receive a milestone payment of $30 million as well as a $25 million adjustment. To see how important this is refer to the chart below.

(click to enlarge)

Essentially there is a lot of money for Arena, and thus Arena investors may see Belviq hit $250 million in sales. Yes, that 53.5% seems quite attractive, but it is based on one-time payments that fall into ranges. In other words, if sales are $300 million, the percentage would be going down. That does not take away from the fact that if Belviq can reach the $250 million sales point, this drug will be doing quite good for Arena.

In previous articles, I had outlined that I would consider 40,000 scripts in the first 3 months as good performance. Some readers (the more bullish ones) were very critical of my figures and felt that they were way too low and arbitrary. The fact is that they are not arbitrary at all, and also happen to line up with the sales figures reaching the first revenue milestone. 40,000 scripts over the period of 1 year would equate to $96 million in revenue. I am essentially saying that after just 3 months, this company could very well be on a path and pace that gets it in the $200 to $300 million neighborhood for the first year of sales. I consider "good" to be getting to that additional $55 million in milestone and adjustment payments. In other words, $250 million in sales is good.

I approach Arena with cautious optimism. For me, it is worth the bet to stay in with the shares I have to see exactly what level of success this company can have. At strategic points (at about $8.00 or less) it could even become a buy in my mind.

There will very likely be some points between now and launch where Arena can be volatile. What we want to watch for is the initial numbers we see relating to the launch. We also need to be cautious about those numbers. Channel checks are not an exact science, and the company has expressed that it is targeting certain regions first. Depending on where the data is collected, a channel check could skew to look much worse than the actuals or much better. That being said, the equity will react to the data presented in those channel checks. For long-term holders it is simply a bump (good or bad) on the way to what they feel will be greener pastures. For savvy traders, there will be a lot of action to consider.

The bottom line is that the moment of truth regarding Belviq is fast approaching. Eisai has outlined a sales goal of about $200 million in 10 months. Essentially, the current goals of Eisai put Belviq on the cusp of a $250 million sales figure that will line Arena coffers with an additional $55 million. As investors we want to see a minimum of $250 million to consider this as a candidate for blockbuster status in the years to come. Stay tuned.

Source: Arena Outlines Belviq Launch And Goals