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Spencer Osborne
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Spencer Osborne is founder of Satellite Standard Group [SSG], and a partner of Sirius Buzz (http://siriusbuzz.com/). Sirius Buzz covers the satellite radio industry as well as companies that do business in this sector. Sirius Buzz provides information and opinion to readers with an interest in... More
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  • Qualifiers For Arena Sales Tracking Articles 0 comments
    Oct 10, 2013 10:31 PM | about stocks: ARNA

    Tracking sales figures should be a pretty easy task, but as with anything that has "passionate fans", there always seems to be discussion over the most minute details rather than the bigger picture. Below are the qualifiers for the Belviq sales tracking series:

    • The data used are based on sales numbers as reported by IMS Healthcare (orange line in the chart). This company reports numbers each Friday.
    • I adjust the IMS data up 30% to account for any underestimates that can arise for a number of reasons. These reasons include length of script, non-reported sales, fluxuations in data, and other factors.
    • Another company, Symphony Health, also tracks sales data. It typically comes out later in the day, and after the sales data from IMS have carried their impact on the markets. I track Symphony data, and I adjust it up by 20%. The chart will show a line for Symphony data line (in green), though it may be one week trailing due to the timing of release. (unless Symphony releases prior to submission of the article).
    • The tracking blue path is a model on how Eisai can arrive at $150 million in gross sales by the end of the year. In May of 2013 Eisai outlined a goal of $200 million by March 31, 2014 (at a shareholder meeting). In June of 2013, Eisai outlined $150 million by the end of the year (on Bloomberg Television on the day Belviq launched. In June of 2013 Arena CEO stated at the Annual Shareholder Meeting that the Eisai projections were "conservative". Subsequent to getting a few weeks of sales data Eisai called the initioal projections "hopeful aspirations". The $150 million remains on this chart representing the original goal. As yet, neither Arena nor Eisai have put forthy any definative sale guidance on Belviq.
    • The charts have an "analysts' expectations" line (depicted in yellow). This line now tracks to $68 million in gross sales by the end of the year. In theory, $68 million in gross sales will pay out about $10 million in "royalties" (percentage of net sales) to Arena. I use an average net script price of $100. In the most recent quarter the average prescription was $82. I'm adjusting upward (to $100 per bottle) because the "weight" of free trials should improve as the next 6 months pass. The analyst line represents what sales would have to track to get to the $12 price target that it has established. Analysts have since adjusted downward.
    • While I talk about gross sales frequently, the driver for Arena is its percentage of net sales. It is gross sales that determine things like blockbuster status, while net sales get to the meat and potatoes of what Arena garners from the sale of the drug.
    • The orange line depicts my 30% adjusted IMS sales. It is currently pacing below the blue hockey stick as well as the yellow analysts' model.
    • The pale green line depicts my 20% adjusted Symphony sales. It is currently pacing below the blue hockey stick line as well as the analyst line.
    • The bright green line depicts my estimates
    • The red line depicts informal company estimates (current)
    • I have not stated that the company will track to any particular line.
    • Arena books revenue when Eisai sells products to distributors (less certain costs) Arena is not booking revenue based on sales to consumers. The prescription data is based on sales to consumers. Thus, an investor needs to be aware that there will be a difference in revenue projections based on sales to end users vs. sales to distributors.

    Disclosure: I am long ARNA.

    Stocks: ARNA
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