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Arena (NASDAQ:ARNA) investors are busy today looking at the Eisai quarterly report, crunching keys on calculators, and trying to find that nugget of information that points to how well the anti-obesity drug Belviq is selling. Eisai is the marketing partner of Arena on Belviq, and Arena gets 31.5% of the net sales.

Eisai (OTCPK:ESALY) reported net sales of about $7.6 million for the most recent quarter and about $16.7 million since launch. In the three quarters in which Belviq has been on the market, net sales have been $4.3 million, $4.8 million, and $7.6 million. Arena gets 31.5% of net sales as well as a few other adjustments. Thus, some quick math tells us that in its Q4, Arena will report between $2.4 and $2.8 million in Belviq revenue.

These numbers would imply that from launch through the end of 2013 that revenue for Arena from Belviq sales will come in at about $5.4 million. This number is well shy of the sales revenue that was needed under some analyst models for a $12 price target. Those active in following the equity were aware of this dynamic about 3 months ago, but the rest of the street will just be learning about it now. Investors should bear in mind that these sales numbers do not include substantial milestone payments that Arena has received in connection with the approval, launch and the deal giving Eisai rights to most of the rest of the world. These milestone payments bolster the cash coffers substantially, however, the equity will track on the sales of Belviq and pipeline potential and not money in the bank.

Eisai has outlined the potential market for Belviq in several key countries. The market includes data relating to obesity, smoking cessation, and diabetes. In the U.S. alone Eisai has the obesity market at about 88 million, the smoking cessation market at 30 million and the diabetes market at 32 million.

(click to enlarge)Potential Market For Belviq - Eisai Quartely Presentation

Source - Eisai Quarterly Report Presentation Material

Eisai also outlined some plans with regard to getting Belviq approved outside the United States. The company disclosed that Belviq is under application in Switzerland, Mexico, and Canada. Eisai also disclosed that it will be filing in Brazil soon. These countries are not news to savvy investors that follow Arena closely. The bigger news was the other countries in the plan. Eisai has slated the next 24 months to submit in Europe, Russia, Thailand, Philippines, Malaysia, The Middle East, and the rest of Latin America. Plans in China and Japan are longer than 24 months out.

(click to enlarge)Eisai Filing Schedule

Source _ Eisai Quarterly Presentation Material

The bottom line for Arena investors is that sales need to increase substantially to carry an impact to the bottom line for the company. The pace in the first 7 months of launch has delivered less than $1 million per month to the Arena coffers. The good news is that we are now in a better time of the year for weight loss products and television advertising is on the radar screen.

I have gross sales through this same period (June 7th through December 31st) at about $30 million. This presents an interesting dynamic. We need to remember that Arena reports sales at the wholesale/distribution level and not the consumer level. In the first quarter of sales, gross sales were $10 million and net sales were about $4.3 million. In the second quarter, gross sales were about $10 million and net sales were $4.8 million. If net sales equate to about half of the gross number, then it would imply that gross sales in the most recent quarter were about $15 million. This would mean that gross sales to date stand at about $35 million. The reason that this dynamic is interesting is that it could point to a decent Q1 in terms of gross sales for Arena. If you consider that the shelves stock has been getting depleted, then restocking those shelves would drive the numbers a bit in the current quarter.

The caution here is that the Belviq story is still taking shape. Even though we are seeing growth, the numbers, in terms of dollars to Arena, are not yet real compelling. The curve of the growth looks good, but the bottom line is what sets the equity price. This will put more focus on weekly sales numbers going forward. Be ready for that. In addition, the indication from Eisai that television ads are now in the April time-frame could let the street insinuate that the Arena's Q1 will not get the bolster most were in hopes of seeing. In some ways, we may be seeing the current quarter concede to modest growth numbers in hopes that next quarter will deliver the sales catalyst. The Arena story just got a bit "less sexy" in the eyes of savvy investors. This could mean that the equity will remain a slave to volatility. Remember, it is strong fundamental sales growth that will stabilize this equity. Stay Tuned!

Source: Arena Investors Look To Eisai Quarterly Report

Additional disclosure: I have no position in Eisai