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Arena Inks Belviq Deal For Israel

|Includes:Arena Pharmaceuticals, Inc. (ARNA)

Arena Pharmaceuticals (NASDAQ:ARNA) has announced that its wholly owned subsidiary, Arena Pharmaceuticals GmbH, has entered into an exclusive marketing and supply agreement for the anti-obesity pill Belviq with Teva Pharmaceutical Industries Limited's local Israeli subsidiary, Abic Marketing Limited. Under the agreement, Arena granted Abic the rights to market and distribute Belviq in Israel for weight loss or weight management in obese and overweight patients, subject to regulatory approval by the State of Israel Ministry of Health (NYSE:MOH).

"Founded in Israel in 1901, Teva is the leading pharmaceutical company in the Israeli market," said Jack Lief, Arena's President and Chief Executive Officer. "Their local presence and proven commercialization expertise are important factors toward making Belviq available in Israel as a new treatment option for chronic weight management."

Abic is responsible for regulatory approval and, ultimately, marketing and distribution of Belviq in Israel, including related costs and expenses. Arena will manufacture finished drug product at its facility in Switzerland, which it will sell to Abic at a purchase price equal to a percentage of Abic's annual net sales of Belviq. In addition, Arena will receive an upfront payment, and is eligible to receive milestone payments upon regulatory submission and regulatory approval of Belviq as well as one-time purchase price adjustment payments based on Abic's annual net sales. Specific terms of the deal are not available.

While Arena longs will celebrate this news, there is an important caveat that perhaps many will miss. The way I read the press release, the deal is for the use of Belviq as a weight management drug. Could it be that if Belviq is found to be useful in other indications, such as diabetes or smoking cessation that Arena still maintains those rights? It is a point of clarity that we may get more flavor on in the upcoming quarterly conference call.

This news is welcomed, but not a driver of the equity at this stage. It will move the needle in the immediate term and then settle back into its groove. The process for application and approval is, as we know, a long one. Bringing a new partner into the fold is good. A little boost in some cash is good. We now need to see how quickly the application in Israel is filed and then await a decision there.

For perspective, Under the agreement with IlDong for South Korea, Arena received an upfront payment of $5.0 million, and will receive an additional $3.0 million upon the approval . Arena will receive a purchase price starting at 35% of Ildong's annual net product sales. The purchase price will increase on a tiered basis up to 45% on the portion of annual net product sales exceeding $15.0 million. The agreement for Taiwan was granted to CYB. Arena will sell finished product to CYB for a purchase price at 45% of CYB's annual net product sales. Arena received an upfront payment of $2.0 million, and is eligible to receive purchase price adjustment payments based on CYB's annual net product sales.

Israel has about 8 million people. South Korea has 50 million people, and Taiwan has 23 million people. The upfront payment for Israel is likely less than what was granted for Taiwan if we look at the market in a logical manner.

Disclosure: The author is long ARNA.

Stocks: ARNA