We now have sales data for the first 20 weeks (5 months) of Belviq sales. Belviq is the anti-obesity medicine brought to market by Arena Pharmaceuticals (NASDAQ:ARNA), and marketed by Eisai (OTCPK:ESALY). This week Belviq sales, according to unadjusted IMS Health data came in just above 4,400 and showed an improvement of about 3% over last week. In addition to weekly tracking this week, investors have the benefit of getting sales insight from the Eisai quarterly conference call. If you are wondering why the equity is down today you may want to check out my article titled, "Arena Stock Reacts To Eisai Quarterly Call".
Over the past few weeks we have been able to recognize that the expectation level for Belviq sales has come down substantially. Over the next week, we should be able to have a much firmer grasp on what expectations will be based on A)The already adjusted expectations of analysts, B) The Eisai quarterly call, and C) The Arena quarterly call that will happen on November 7th. Until then, even with expectations lower, there will still be some volatility.
The charts now reflect the initial analysts expectation line in yellow, my model in green, $150 million in sales by the end of June of 2014 in red, adjusted IMS Health numbers in orange, and adjusted Symphony Health numbers in pale green. Typically I list several qualifiers with respect to this chart. Rather than cloud this article, readers can find qualifiers on my Instablog here.
As stated, this week the unadjusted IMS scripts came in at just above 4,400. This represents a week over week gain of about 3%. In my opinion, given the expectation level now, week over week gains between 3% and 6% will be neutral. It will take a 10% week over week gain to be above what the street is typically expecting. My adjusted IMS script number is 5,734.
The 30-week chart below outlines the overall pace and projected paths through the end of 2013. The current pace for script sales is pointing toward about $30 million in gross sales to consumers by the end of this year. It would take roughly $68 million in gross sales to garner Arena the $10+ million in revenue analysts were looking for in establishing $12 per share valuation targets in early models. Pooling analysts more recent models together, the new expectation is between $5 million and $6 million in "royalty revenue" to Arena with about an $8 price target.
Investors need to remember that Arena is paid based on net sales, not gross sales. My analysis is that, based on a $199.50 per bottle gross sales figure, it would take about $35 million in gross sales to achieve $5.5 million in sales revenue to Arena. I apply a $100 per bottle net sales figure to the number of scripts sold to calculate a running total on theoretical revenue to Arena. Based on what we learned from Eisai today, my $100 Net sales per bottle was slightly high. It appears that the Net sales per bottle in the most recent quarter was between $90 and $96. This is an improvement from about the $82 we saw last quarter. I expected improvement as the free trial sales became less of a drag on the company and simple discounted sales improved. For the time being I will continue to use $100 as a Net sales assumption. Investors should note that Arena and Eisai recognize revenue when the wholesaler buys the drug, not the consumer. The data in this chart is reflective of consumer purchases of Belviq.
I have stated many times that I like to see growth despite a holiday. That is pretty common sense thinking. If a product is very compelling to consumers, they will gravitate to it in numbers that can show growth even with the hurdle of a holiday. Belviq is not yet at that level. Over the next 10 weeks or so we will have Veteran's Day, Thanksgiving, and a Christmas holiday that falls in mid-week. These weeks will likely carry negative to flat sales numbers. Investors should be ready for that. The Arena stock reacts to weekly sales numbers. If we see these holiday weeks deliver flat sales, I would consider that a positive and a signal that advertising and the added sales force are carrying impact. The next several weeks will have challenges.
· Weekly IMS numbers are up 3% week over week
· Current unadjusted IMS sales are at 64,886
· Current 30% adjusted IMS numbers are at 84,352.
· Estimated YTD gross sales (to consumers) is $16,828,184*
· Estimated YTD net sales (to consumers) is $8,435,200*
· Estimated YTD Arena share (from sales to consumers) $2,657,088*
*Arena is not using sales to consumers to book revenue. It is using sales to the wholesaler to account for revenue. Eisai books sales to wholesalers as well. Weekly scripts are tied to actual consumer sales, thus the translation in revenue modeling.
Additional disclosure: I have no position in Eisai
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. I have no position in Eisai