Belviq Sales Crack Critical Level

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 |  About: Arena Pharmaceuticals, Inc. (ARNA), Includes: IMS, OREX, VVUS
by: Spencer Osborne

Summary

Script sales up 3.4%.

Scripts sales eclipse 11,000.

Trajectories closing out the year are important.

Sales of the anti-obesity Drug Belviq from Arena Pharmaceuticals (NASDAQ:ARNA) passed a critical level today with an improvement of 3.4% over the numbers last week. For the first time, sales of Belviq eclipsed the 11,000 level according to industry tracker IMS Health (NYSE:IMS). The reason that the 11,000 level is critical is that it has represented a sales ceiling for another weight loss pill from Vivus (NASDAQ:VVUS) called Qsymia. Getting above that ceiling is something that the Street has been seeking in order to assess whether prescription weight-loss pills can gain consumer traction at levels that illustrate the possibility of these companies as well as the sector. With a third pill, Contrave from Orexigen (NASDAQ:OREX), getting possible approval in a couple of weeks, breaking above the 11,000 barrier carried added importance.

The trajectory of Belviq sales remains on the pace that I outlined several months ago. I have been anticipating that the sales line could break above the trend line in the very near future. As yet, that has not happened, and it would appear that we may need to wait until the end of September to see the breakout in those sales numbers. At this stage, the Street is anticipating that $100 million in gross sales can be obtained this year. Getting above that sales level to any degree would be a positive, however, the more it is beat by the more the stock price will appreciate the numbers. I estimate that about $110 million in gross sales will be the final figures for the end of 2014.

Chart Source - Spencer Osborne

Chart Source - Spencer Osborne

In looking at the data from a quarterly and year over year perspective, we can assess the growth in a manner that is more traditional. Sales this week vs. sales for the same week last quarter showed a 25% improvement. Sales this week vs. the same week a year ago demonstrated a 193% improvement. So far, Q3 of 2014 is 33% better than Q2. This metric has been trending down each week. The quarter over quarter improvement last week was at 34%. I have stated that I expect the final numbers to show a 25% improvement from Q2. One thing that we want to watch for as the current quarter closes out is whether or not we see the scripts accelerate better than the trajectory last year. In Q3 of last year, this week represented a peak for the quarter. The Labor Day holiday brought a dip in sales and recovery through the end of the month brought sales back up. In essence, the last 6 weeks of Q3 last year were very flat showing a 3% gain over that period. What we want to see this year is an improvement above those levels.

Chart Source - Spencer Osborne

Shifting to revenue, we can see some notable firsts this week. The first item to note is that net sales, in my estimation, have surpassed the $30 million mark. Arena is paid on a percentage of net sales. The second notable item relates to annualized numbers. The annualized Arena share of revenue is now above $20 million and the averaged annualized number has eclipsed $15 million. I have overall 2014 gross sales estimated at just under $57 million. This would imply that we need sales at $43 over the remaining 19 weeks of the year. That would imply a desire to see $2.26 million per week. For perspective, gross sales this week were $2.24 million. Simply stated, if sales remained flat for the rest of the year, the $100 million guidance would be obtained.

Chart Source - Spencer Osborne

Chart Source - Spencer Osborne

Summary

The 2% and 3.4% gains over the last two weeks are very encouraging signs for Arena investors, but we cannot get ahead of ourselves. Remember, the goal is to see traction at levels that impress the Street so that the equity price can rise. That dynamic is still a few weeks away. The two cautions on the horizon are the Labor Day impact to sales and the possible approval of Contrave. If Contrave does gain approval, it will have sales that could have potentially been Belviq sales. While Contrave will not likely launch immediately, the Street will begin to look at the sector with another player. Breaking the 11,000 barrier was important. It now is important to try to stay above that level. Remember, last year there was a 6-week "lull" at this stage. It is important that sales show traction above the trajectory we saw last year to mitigate the thought that a ceiling exists. 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 Vivus, Orexigen, or IMS Health