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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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  • Adjustments On Arena's Belviq Script Sales 6 comments
    Mar 9, 2014 3:16 PM | about stocks: ARNA

    I always find it amazing that some people go through extreme lengths to find any way possible to criticize the work of others because that work does not wave pom-poms.

    I have covered Arena Pharmaceuticals since well before launch, and have been tracking sales since the launch. I interviewed industry people, assessed data, and arrived at some realistic assumptions about how to assess the sales data. Throughout that time people have said adjustments were too high, too low, that IMS is better, that Symphony is better. Throughout that time I have seen people shift focus from IMS to Symphony and back again depending on which one showed more growth in a particular week.

    After the most recent conference call from Arena, I made another adjustment to script numbers that I feel is prudent. Now, people are jumping all over it with hatred and a total lack of research or understanding. However, lets look at my history between launch and December 31st to assess where I was relative to the information that 157,000 bottles shipped.

    First, we need to understand that IMS and Symphony track sales to consumers, and not the inventory on the shelves. The 157,000 would represent sales to the consumers, as well as stock on the shelves. Thus, IMS and Symphony should be LOWER than the 157,000 bottles by the amount in inventory on the shelves.

    Now, here were my adjusted numbers for the period between launch and December 31st:

    IMS adjusted was about 140,000. That would imply inventory on the shelves of about 17,000.

    Symphony adjusted was about 150,000. That would imply an inventory of about 7,000 on the shelves.

    Now, understanding that there are some 20,000 pharmacies and there is about 7,000 to 8,000 scripts sold per week, and that Eisai has to have inventory to fill the need of sales plus some to have ready to go for the following week, etc., what is a reasonable inventory level. My opinion was that it is likely somewhere between 30,000 and 50,000 at any point in time. This is reasonable because it will be used through the next report in July or August. Yes, it could be a bit high now, but may well be a bit low in 4 months. Over time, it will balance out.

    Here is the bottom line. I have demonstrated over a period of time that my adjustments are pretty reasonable, accurate, and get us into the ballpark of where sales are in actuality. I do not make changes at a whim. I make changes when solid data becomes available that helps to assess the situation. My latest assessment is that a 10% adjustment on IMS and leaving Symphony alone is likely the prudent place to be.

    Rather than assess these types of things with a rational process, some Arena investors want to find someone to take their anger out on because the equity, and the sales have not met with their very, very bullish expectations. Ironically, with the statements made by Eisai and Arena, sales should be 5 times better right now than they are, yet people will want to pick a fight with the guy that outlined the sales pace with far more accuracy. Such is life.

    Disclosure: I am long ARNA.

    Stocks: ARNA
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Comments (6)
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  • phemale60
    , contributor
    Comments (3034) | Send Message
    We all need to be patient and stay calm.


    You're a good man, Spencer.


    9 Mar 2014, 06:13 PM Reply Like
  • gazoky3
    , contributor
    Comments (39) | Send Message
    Spencer, stay calm, you are doing things very, very well.
    Thank you very much
    10 Mar 2014, 11:17 AM Reply Like
  • jakes101
    , contributor
    Comments (1119) | Send Message
    Unmolested raw #'s is the way to go. I never liked the concept of adjusting the #'s in the first place. I understand why you did it...still I never liked it.


    I don't like it because it's not natural to the rest of the street's reaction. The #'s come out and the street reacts to that news, most people do not adjust or come to seeking alpha to see the adjusted #'s. It creates more confusion and problems. Just my opinion. I like all the research and the attempt at accuracy, not so much the adjustments.


    It's all about SALES!
    10 Mar 2014, 12:45 PM Reply Like
  • Spencer Osborne
    , contributor
    Comments (12023) | Send Message
    Author’s reply » jakes...


    The street reaction to the numbers is typically based on what percentage up or down they are.


    The reason for adjusting the numbers is not so they look big or small, but instead to be able to assess the sales revenue, because THAT is what really matters.


    It has ALWAYS been about the revenue side with my tracking.
    10 Mar 2014, 12:49 PM Reply Like
  • DSandman999
    , contributor
    Comments (2466) | Send Message
    Howdy Spencer,
    It might make sense to pass on to the powers that be, that they are causing confusion by not releasing this information on a regular basis. Comp sales are regularly released in a number of industries, many on a monthly basis, if not weekly. ARNA may not have the numbers but one should hope that Eisia should. I believe part of the adjustment issue is that they are not sync'ed up with real numbers until those numbers are not meaningful, ie quarterly.
    I actually like the adjustments, but if you might take some graphing advice from someone who does a lot of it for folks that do not know how to read them - put out a graph showing the projections with each level of your assumptions (30,20,10%) and graph against it any numbers you have that you consider real, even in hindsight, like a quarterly presentation. While a bit busy, it will also show how your data gradually ranges into the numbers presented by each of the sources. A cardinal rule I follow on graphs is to have all the relevant data represented, if possible, and not assume someone remembers something I presented before.
    10 Mar 2014, 02:42 PM Reply Like
  • jakes101
    , contributor
    Comments (1119) | Send Message


    Everyone drank the water that came from 2 wells. Everyone agreed that they both tasted prettty bad...one a bit less than the other...but still bad. The water already went through a purification process, but still some wanted it to taste like San Pellegrino Limonata. Appreciated, but the bad water is the water that everyone else is drinking. Thus reality.


    When you get low #'s and you adjust up by 30% like you used to, it almost artificially eases the pain... accurate or not.... I never liked it. The rest of the street was not impressed, pain was not eased and they were very deeply concerned, nor did they apply adjustments. The street as you just stated, reacts to the % up or down in scripts....and they indeed reacted!


    I guess the main beef that I had was your adjusted #'s became the "TRUE" count and you based your forecast and analysis on the adjusted #'s, while the rest of the street was not having any of it and short interest was increasing. I think I would have rather you stated that these are the real numbers the street is going off and lets base our forecast and future sales on these numbers alone, then state....IF the numbers were adjusted by X we would predict sales of X. Instead you based most of it on your adjusted numbers and I felt that it created an artificial expectation compared to the streets natural flow of information, expectation and more important REACTION!


    Sometimes it does not matter how accurate YOU want the #'s to be...if the street is using the same source we use...super accurate or not, then those are the #'s... then we must use those #'s! You open Pandoras box....it becomes "Spencer's" adjustments and fuel to ARNA nuts to say increase it more and more.


    Look, I love the info and research you provide and will continue reading. I just felt like I had to get this off my chest, I never liked it, it was not my cup of tea, but I understood the accuracy you were trying to achieve. No way in hell am I blaming anything on your adjustments, or releasing steam on the author. The very high expectations were placed early by the companies themselves......this is what the street reacted to, no doubt about that! I just think this was an important debate to have and I appreciate the blog you did here.


    Keep up the great work. Cheers!
    10 Mar 2014, 03:19 PM Reply Like
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