Arena Inks a Potential Blockbuster Deal

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 |  Includes: ARNA, VVUS
by: KLLJ Investments

In my SA article from May, I discussed the potential value for Lorcaserin in the marketplace.

As I stated then, " a partnership before approval can quickly change the game. I fully expect that to happen and once it does, we’ll have insight into how Big Pharma values a First Line Obesity Treatment."

It looks like Jack Leif made good on his long time prediction of inking a commercial agreement for Lorcaserin by mid-2010 proving the market and many analysts wrong. This deal has blockbuster potential on it given the milestone and sales goals listed for the US-only commercial agreement.

Highlights:

  • $50M Initial Upfront
  • $90M Upon FDA Approval (PDUFA October 22nd) bringing upfront for US marketing rights to $140M
  • $70M After additional regulatory goals are met (I suspect from the completed BLOOM-DM Study), which in effect gives them over $210M in upfront
  • $1.16B in one-time purchase price adjustments after certain sales goals. WOW
  • 31.5-36.5% of annual Lorcaserin Sales

This is a rich deal for the US-only rights for Lorcaserin. Given the opportunity in the obesity space, we could see similar size deals for the rights in the EU and Asia.

I fully expect Lorcaserin to quickly be prescribed 'off-label' with Phentermine creating a LorPhen combo, a completely safe version of the potent yet harmful FenPhen blockbuster combination. Lorcaserin as a mono-therapy will be the first choice for a majority of primary care physicians in the US, with some physicians prescribing in combination with Phentermine for 12 week cycles followed by Lorcaserin alone as a maintenance drug for long term use. If this comes to fruition, Lorcaserin will be a Billion dollar plus drug in the US alone within 2 years after launch making this deal very good for both Arena and Eisai. To have this deal happen prior to the VVUS (July 15th) or ARNA Advisory Committee meetings speaks volumes for the potential of Lorcaserin as the first line choice for obesity.

Disclosure: Long ARNA