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Be Patient With Television Ad Impact

|Includes:Arena Pharmaceuticals, Inc. (ARNA)

This instablog is being written simply to provide some information to investors relating to Arena Pharmaceuticals (NASDAQ:ARNA). It is not really appropriate for a standard article, but does provide some insight into the pending advertising that we should begin to see for Belviq on television.

Television ads are great, but I am not looking for anything extraordinary from them (such as sales increasing by a factor of 9). In fact, I have estimated that 2014 sales will be in the neighborhood of $150 million based on data and reasonable growth.

Eisai is in charge of marketing Belviq. This is also the company that marketed Aricept. I do not expect the Belviq ads to be viral in nature, and in fact feel that they will be good, but to the point without getting into too much detail.

Eisai got a slap on the wrist for Aricept ads in 2010. The company will be careful with ads because of this. An example of the Eisai Aricept ad shows a good ad, but not an ad that sends people rushing to the doctor soon after seeing it. I do not anticipate Eisai doing an ad that a standard consumer would find "catchy".

We can all agree that Aricept was advertised on television. There were a few different ads that ran. Now lets look at the sales of Aricept over time and see what types of growth we were looking at:

  • 1999 - $ 563,000,000
  • 2000 - $ 695,000,000 +23.3% (television ads start)
  • 2001 - $ 936,000,000 +34%%
  • 2002 - $1,130,000,000 +20.4%
  • 2003 - $1,380,000,000 +22.8%
  • 2004 - $1,590,000,000 +15%
  • 2005 - $1,920,000,000 +20.6%
  • 2006 - $2,470,000,000 +28.7%
  • 2007 - $2,840,000,000 +15.1%
  • 2008 - $2,970,000,000 +4.4%
  • 2009 - $3,150,000,000 +6.3% (FDA Critical Of New Ads)
  • 2010 - $2,840,000,000 (10.1%)
  • 2011 - $1,440,000,000 (49.4%)
  • 2012 - $ 921,000,000 (35.9%)

Aricept was regularly advertised on television. What we never saw was sales increase by a factor of 9. In fact, it took almost 10 years for sales to reach their peak and that was less than a factor of 6 (not anywhere near 9x) and certainly not on the pace that some seem to feel advertising on television will deliver.

The point of this is simple. Try to be realistic. I have projected sales in 2014 at $150 million. That will require scripts to get above 24,000 per week at the end of this year. That is three times what we are seeing for script numbers now.

Yes, the ads will be professional and good. However, in many respects they will likely also be pretty vanilla. They will not feature well known people, and we do not even know how often they will run, on what channels, in what markets, etc. If gross sales are expected to be $150 million in 2014, how much do you think Eisai will invest into advertising?

Some are really putting the cart before the horse on these ads, and setting expectations that are simply not at all likely to happen.

Disclosure: I am long ARNA.

Additional disclosure: I added to my already long position in Arena on 3-25-2014.

Stocks: ARNA