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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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  • Be Patient With Television Ad Impact 7 comments
    Mar 25, 2014 2:16 PM | about stocks: 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
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Comments (7)
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  • vitosoranno1
    , contributor
    Comments (1632) | Send Message
    Hi Spencer,


    I'm not convinced that the comparison of the experience with Aricept's TV ads are a valid predictor of the upcoming Belviq TV ads.


    The reality is that the Food and Drug Administration (FDA) chastised the television commercials for Aricept, a medication for Alzheimer's Disease, as "misleading," "deceptive," and "not supported by the available research data."


    Further, because it became apparent to users of Aricept that the effects of the drug were minimal, at best, sales nosedived.


    In a nutshell, Aricept is a very minimally effective drug while Belviq is a highly effective drug with a large portion of its users.


    Spencer, you should be able to identify a more relevant comparison.


    If the Belviq TV ads are even moderately well done, they should result in a significant increase in Belviq's sales. At the current time, most people (including the obese as well as many doctors) are totally unaware that Belviq exists as well as the potential benefits to the two thirds of America's population that is either overweight or obese. Effective TV ads will go a long way in correcting this situation.


    The major hindrance to Belviq's sales has been that people do not know about the drug. The TV ads will go a long way in eradicating this problem, Belviq's sales will increase significantly and the price of Arena's stock will soar.


    25 Mar 2014, 03:38 PM Reply Like
  • Spencer Osborne
    , contributor
    Comments (11480) | Send Message
    Author’s reply » vito...


    Television ads for Aricept started in 2000. The ads that the FDA hit Eisai on the head with were from 2009 and 2010.


    There were no real "issues" in the heyday of aricept, yet we did not see sales growth move up by a factor of 9 even when there were no issues. Do you agree?


    The fact is that those looking for an increase by a factor of 9 are selectively reading a CBO document that illustrates the peak of pharmna ads and the decline of them. Ask those who tout this to provide their source for the 9x estimate and you will see that it is not at all grounded in reality.


    So, now you have outlined your critisism. Let's get to brass tacks:


    I have outlined that sales will be about $150 million in 2014.


    You say that the ads will result in "SIGNIFICANT" increase in sales.


    1. Please define your meaning of "SIGNIFICANT" in terms of the number of scripts.


    2. Please define your timeline for us to see this "significant increase"


    3. Please define how much you feel the stock will "soar" and in what time frame.


    Let's step away from innocuous generalities and get to specifics. Too many Arena investors are too afraid to do just that. They all say great things, but never put a timetable or metric to their statements.
    25 Mar 2014, 03:56 PM Reply Like
  • TF Wright
    , contributor
    Comments (58) | Send Message
    I agree that patience and being realistic should be the paths stockholders follow with ARNA, but then I remember how much I've enjoyed the entertainment some of the posters have provided.


    Thanks for the info, Spencer!
    25 Mar 2014, 08:10 PM Reply Like
  • Spencer Osborne
    , contributor
    Comments (11480) | Send Message
    Author’s reply » TF...


    I have seen a myriad of communication now anticipating sales to increase 9 fold in a short timeframe. It is utterly unbelievable!


    Of course, here is where we are at:


    1. Those that are looking for 9X will not put a timeframe on it because that would set up the possibility of disappointment.


    2. The 9X will not happen this year and probably will not even happen in 2015. 9x is 72k scripts a week using unadjusted numbers. Then of course, there are those that think we are at 10k already...Those people will be looking for 90K per week.


    3. Everytime I ask someone to put a timeframe or a number to their expectations I hear CRICKETS
    25 Mar 2014, 08:18 PM Reply Like
  • TF Wright
    , contributor
    Comments (58) | Send Message
    I'm surprised no one's called you a Basher yet. :-) A month after the first commercials air, the comment section will look like there's a full moon.


    "How poor are they that have not patience." The Bard of Avon
    25 Mar 2014, 09:49 PM Reply Like
  • bigkuz87
    , contributor
    Comments (3) | Send Message
    It is exciting that we are finally close to seeing these television ads, I am sure most long term followers of the stock (myself included) have been awaiting this catalyst for quite some time. Now, I am with you on this article and don't expect the ads to propel Belviq to blockbuster status overnight, but I certainly do think they will push us in the right direction. My concern is this, what has taken Eisai so long to get the ball rolling on these ads, have you any idea? It seems to me these ads should have been up and running for a few months now. Has Eisai been dragging their feet on this project, or are there certain regulations that I'm unaware of causing the delay?


    Good Day Sir
    26 Mar 2014, 01:45 AM Reply Like
  • Spencer Osborne
    , contributor
    Comments (11480) | Send Message
    Author’s reply » big....


    While I believe that ads would have been better to start in late December, it is a process. The FDA is looking into pharma ads closely these days, and Eisai has had their hand slapped in the last couple of years.


    Getting to higher insurance levels was critical, and I am sure that several market studies conducted by Eisai that point to reasons why starting in April is better than earlier.
    26 Mar 2014, 08:43 AM Reply Like
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