Arena Inks Belviq Deal For Taiwan

| About: Arena Pharmaceuticals, (ARNA)

Arena Pharmaceuticals (NASDAQ:ARNA) announced today that the company has signed a deal with CY Biotech for marketing and distribution of the anti-obesity drug Belviq in Taiwan. Belviq is not yet approved for Taiwan, but clearly the companies intend to get the application process rolling in the near term.

Arena will manufacture Belviq at its facility in Switzerland, and sell the finished product to CYB for a purchase price at 45% of CYB's annual net sales. As part of the deal Arena received an upfront payment of $2 million, and is eligible to receive purchase price adjustment payments based on CYB's annual net sales, as well as a milestone payment upon approval of the first additional indication for Belviq by the Taiwan FDA. CYB will be responsible for the development, regulatory approval and, ultimately, marketing and distribution of Belviq in Taiwan, including related costs and expenses.

The percentage of NET sales at 45% is noticeably higher than the sliding scale in the deal between Arena and Eisai for marketing the drug in the Americas. One likely reason is that Eisai (OTCPK:ESALY) is paying a substantial portion for a lot of ongoing and future studies relating to Belviq. If the deal with CYB is structured similarly to the Eisai deal, Arena will receive the greater of a guaranteed minimum per pill or the 45% of the net sales. Net sales remove discounts, spoilage, rebates, shipping, etc. from the gross sales figure.

Arena indicated in its press release that half of Taiwanese men and 33% of women are overweight or obese. This makes Taiwan a leaner nation than the United States, which has about 66% of the population in the overweight or obese category. Nearly 85% of the Taiwanese population is in the age category for taking Belviq.

The population of Taiwan is about 23.3 million, with that number split evenly between men and women. With about 20 million adults, the potential market would include about 5 million men and 3.3 million women. While the market is not substantial, every bit helps. I do not expect this deal to be a stock driver in the near term, but do feel that it adds incremental value, especially when weighed with the other deals and approvals that will be coming in the near future.

There has been no indication as to a time-frame for gaining approval. The company has partnered with Ildong in Korea, and has applications pending in Canada, Mexico, Switzerland, and Brazil with some countries working in cooperation with others. The application in Europe was withdrawn so that the company could answer regulatory agency questions. A new submission date in Europe has not been established.

Arena will be conducting its Q2 conference call on August 1st. It is anticipated that this will offer the company's first impressions on Belviq sales in the United States.

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.