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In a handful of articles months back, I cast serious doubt on the bull forecast for Arena Pharmaceuticals' (ARNA) launch of its anti-obesity drug Belviq. In one article in particular I laid out my estimates for the drug's first full quarter on the market, which was based on my understanding of the mechanics of a general commercial drug launch, and the proclivities of Belviq's launch in particular. For my trouble, I was lambasted by Arena bulls, threatened, and even received a number of fallacious comments attacking my character. While I was surprised that math could be so dangerous to one's own well fare, it didn't hinder my belief that ARNA's PPS was artificially high, trading in the $8-$9 dollar range at the time.

Since then, Arena has released its first month sales figures, and the stock has traded below $7 for the majority of the time post-launch. As such, I thought it would be a good time to compare my previous model to the actual data. In effect, how did I do versus the bull predictions?

To do so, I compiled my estimates and interpolated them for first month on the market to compare them to the actual data recently released by Arena.

Table listing EPE's pre-launch estimates versus the first month sale's data.

Parameter

EPE Estimates

Launch Data 1st Month

Difference

Number of Scripts Written

13,426

12,500

926

Gross Sales Revenue

3.3M

4.1M

800k

Arena Net Revenue

> 1M

1.3M

400k

Script Rate per Physician

4

3.2

.08

Number of Doctors writing scripts

3354

3900

546

In terms of number of scripts written, my estimates were within 1k of the actual number provided by Arena. In a similar manner, my estimates are strikingly close for gross sales revenue, coming in at less than a million dollars difference. Arena net revenue was higher than I projected, but wasn't glaringly different (see the above Table). I also come in almost spot on for the script rate per physician, being less than 1 script per doctor off. Finally, I estimated that approximately 3354 doctors would prescribe Belviq in the first month, which was only 546 shy of the actual number. In sum, my estimates were clearly on the mark, despite the bellicose rhetoric of enthusiastic longs.

The biggest takeaway is this: Arena's current market cap of 1.5B is only being supported by its recent milestone payments by Eisai, not sales of Belviq. Specifically, $1.3M in sales revenue does not support such a market cap from a fundamental perspective. As the Belviq sales figures look to continue to track my prior forecast, I stand by my prediction that ARNA will be in the $4 range by the end of the year (see hyperlink above for details). This isn't meant to generate panic amongst longs, but it is food for thought. Overall, my analysis strongly suggests that ARNA still represents an excellent short candidate given that Belviq sales cannot ramp up fast enough to support a billion dollar market cap in the near future.

Source: A Look Back At Prior Belviq Sales Predictions