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Flat scripts demonstrate seasonality and the fact that Eisai is offsetting it.

Refills becoming point of focus.

Quarter over quarter growth is softening.

Sales of Arena Pharmaceuticals (NASDAQ:ARNA) Belviq were up modestly this week, a dynamic which speaks to seasonality, but also calls into question the marketing efforts of Arena's partner Eisai (OTCPK:ESALY). While sales have been able to show growth over the last 7 weeks rather than a decline, the performance in the last two months has not been enough to get the street excited. It is really as simple as that. With each quarterly call I assess my data against the data that we learn from the call to determine any adjustments that will be needed to model good estimates going forward.

After the last quarterly call, I lower my upward adjustment to IMS health script numbers from 10% to 5%. Immediately some very passionate Arena investors saw this a a move to downplay sales and as a manipulative effort. That could not be further from the truth. Any reasonable person that has followed this series of articles is likely well aware that the entire goal of the adjustments is to have a barometer to predict sales revenue. In Q1 of 2014 my assessment was very tight vs. the reality. I had projected sales at 42.9 million and that is pretty much exactly where the sales came in. This quarter, I am embarrassed to say that my 5% adjustment was off of the mark. In fact, it was higher than it should have been. My model called for Belviq revenue to be at about $4.1 million. Actual revenue was $3.53 million. Essentially I was about $600,000 too high. Ironically, the proper adjustment in my model would have been a negative number. I hesitate to do that, because at some point the situation will balance out. That being said, I am now using IMS data without adjustment to assess revenue going forward. As a side note, those that swear by Symphony data will likely have an extremely difficult time justifying those numbers. It is bad enough dividing $3,529,000 by the 110,000 scripts IMS reported for an average of $32 per bottle. Do investors really want to divide $3,529,000 by the 135,000 reported by Symphony for an average of $26 per bottle?

Sales this week were up a modest 1% at just over 10,400. Seven weeks ago sales were at just under 10,000. In the last seven reporting periods the average growth is at about 1.8%. That performance is better than the typical decline that seasonality delivers, but it is not overly impressive considering the additional sales reps, increased television advertising, and the data we have seen. Arena stated in the quarterly call that 43,000 doctors have scripted Belviq yet weekly numbers have stalled out at around 10,000 as we enter the most challenging time of the year for the segment. The sales data (orange line) is still tracking pretty tightly against the $100 million pace line (green). I do believe that in the next few weeks we will see the sales line track above the green line in a modest fashion. I feel that the 2014 sales will pace toward $110 million by the end of August.

Chart Source - Spencer Osborne

As I have always said, the revenue story is the important factor in considering this equity. The question is when or if Belviq sales can pay for the overhead and expenses of the company. As I have indicated, my adjustments upward are no longer in play. I have also gone back to the beginning of the quarter and taken away upward adjustments as it is clear that free trials are a big part of the sales at the moment. The revenue story is still early in the process, but at this stage, the street is well aware that at 6 months into 2014 the company has made just $6.4 million from Belviq. This type of number will not pay the bills.

(click to enlarge)

(click to enlarge)

Chart Source - Spencer

The bottom line here is that Belviq sales are fighting seasonality, but not to a level that is instilling any real confidence in the street. The street is already anticipating that a new drug can be entering the space as early as September. Also being considered is that the 43% quarter over quarter jump in prescriptions is not likely to happen again in the current quarter. We are already seeing the quarter over quarter numbers break below that pace. If a 43% increase in scripts last quarter brought only a 22% increase in revenue, then a lower increase in scripts this quarter may make the revenue numbers next quarter a bigger challenge. This past week was the 4th week of the quarter, The numbers this past week were 36% better than the same week in the quarter prior. As you can see in the chart, the recent sales are flatter than what we were experiencing last quarter. Overall, Q3 is right now 41% ahead of Q2.

Chart Source - Spencer Osborne

In summary, there are several reasons why the current quarter needs to be watched closely. The number of free trials and the refill rate are becoming central points that the street wants to see answers to. The fact that Arena is not offering up any real flavor on these statistics is cause for concern. I can assure you that if the numbers were trending in a positive fashion that the data would be heralded. I cover refills for my readers, so they will have some insight that is simply not available elsewhere. We have about 4 weeks before the possible entrance of Orexigen's (NASDAQ:OREX) Contrave onto the scene with big pharma partner Takeda. It is getting to the point where it imperative that Eisai make a big statement. Stay Tuned!

Disclosure: The author is long ARNA. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have no position in Eisai or Orexigen