As investors in Arena (ARNA) know, the equity can be volatile toward the weekly prescription numbers for the anti-obesity drug Belviq. If the numbers pace well, the equity can respond in a positive manner. If they are perceived poorly the equity turns negative. Thus far the sales have been ahead of the very modest pace Vivus (VVUS) saw with competing drug Qsymia, but not so high that people are screaming blockbuster with Belviq. Simply stated, the sales seem to be pacing decently, but the trajectory they take as time passes will tell the story of how well the equity will respond.
The fourth week of IMS data on the anti-obesity drug Belviq shows 2,064 prescriptions. I adjust this number upward by 30% to account for possible modeling errors related to the data. Symphony Health also models sales and its numbers have been coming in higher than IMS. If you do consider that Symphony numbers are closer to the actual number it would make sense that the adjustment assigned to Symphony would be less than that assigned to IMS. As stated, I use a 30% adjustment to IMS. Some items to consider:
- The chart I use in tracking scripts includes two paths to $150 million (a stated goal of marketing partner Eisai). One illustrates straight line growth (yellow), and the other shows hockey stick growth (BLUE).
- I use IMS Health data (adjusted) in the chart (orange line) . Symphony Health is another company that tracks sales data.
- I adjust the IMS data by 30%. This accounts for under-reporting in the IMS model, multiple month scripts, etc. The 30% is based on historic models for other drugs, including Qsymia.
- I have received a few questions about refills. This model takes into account all scripts. Thus, it includes new sales and refills. I do model issues such as refill rate, etc., but this is about the number of scripts needed (new or refill) to get to a specified sales target.
- The data are the data. I made a model that I felt developed two reasonable paths to $150 million in sales within 30 weeks.
- The $150 million in sales by the end of the year is not "official guidance" in the classic sense, but was a number offered up by Eisai (ESALY.PK). In mid May Eisai guided its investors to $200 million by March 31st of 2014.
- The chart has 3 lines. Two (blue and yellow) are paths to $150 million. The third line (orange) is tracking the adjusted IMS sales data. The orange line is currently tracking along just above the hockey stick model (yellow) and thus still not very apparent on the chart (look closely).
- These are early numbers. We will know more about the chances of hitting $150 million by the end of the year somewhere between week 12 and 16.
- The data are not bullish, or bearish. The data are simply the data, and only bullish or bearish when compared to expectations and/or the guidance offered by the company, analysts, or an investor's expectations.
- The equity will respond based on market expectations. Those expectations vary. If Belviq sales can come in near $150 million it will be a big positive. If the data misses it will be a negative. Many analysts are currently projecting well below the $150 million sales pace.
- The $150 million is gross sales. The Eisai Arena split is based on NET sales.
Tracking To $150 Million By Year End
The sales IMS Health reported in the third week came in at 2,064 total scripts. This number is down from the previous week of 2,222. One big consideration is that the data from this week encompasses the 4th of July holiday. That makes the week much shorter than it otherwise may have been. People likely had travel, family functions, or simply needed to rest at home. With the 4th of July on a Thursday, it is conceivable that many simply treated Friday like a holiday as well.
In my chart I feel that it is important that Belviq sales be above at least one of the two paths (straight line or hockey stick) to $150 million. Thus far Belviq has not disappointed in that regard, as it has remained above the "hockey stick" model. It is still very early and I want to stress that better indications of the actual path will begin to take shape beginning in week 12 or so. Here is where we stand:
- Actual IMS Data for the week ending July 5th was 2,064
- Actual cumulative data is 7,202
- My adjusted total for the week was 2,683
- My cumulative adjusted total is at 9,363
- The hockey stick model for this week was looking for 2,206
- The cumulative hockey stick model total is 7,159
- The straight line model for this week was looking for 5,878
- The cumulative straight line model total is 14,636
- The total number of scripts we need to achieve $150 million is 750,000 in 30 weeks.
- My adjusted total thus far is 9,363. This implied that we want to see 740,637 prescriptions sold in the next 24 weeks.
- Using $199.50 as a revenue number the total revenue so far stands at $1,867,838. This would imply that we want to see the next 24 weeks deliver $148,132,162.
Investors should be aware that this equity will move based on the instant perception of the weekly data. The weekly numbers will be played by more active traders, while longer term investors (long or short) will look more at the trend and where it is heading. In my opinion there will be volatility in the early weeks because with only a few data points the trend line is not very mature yet. We should be able to see a more realistic trend somewhere between weeks 12 and 16.
The Qsymia Measuring Stick
The chart below simply outlines a comparison of the Belviq launch vs. the Qsymia launch. As stated earlier, the Qsymia launch was very modest and well below expectations. There are different dynamics between the companies, how the products were brought to market, etc. It is important for Arena investors to see performance well ahead of Qsymia for the simple reason that the market did not like the Qsymia sales data very much.
Do not get over-excited about early data, and in particular the data from this week. The holiday could carry an impact. Understand that the equity is sensitive to the data no matter what, and regardless of holidays, there are sales goals that need to be met. Stay Tuned.
Additional disclosure: I have no position in Vivus.