Arena Pharmaceuticals Could Be Going On A Diet Soon [View article]
I will try to be as brief as possible. I work in the pharma industry for a fortune 50 company. I know drugs and I know the payers (insurance companies). Here are some facts that might help this discussion;
1. Only about 40% of all prescriptions yield the clinical benefit that the doctor prescribed. Payers and physicians are used to this waste and are generally expect that all drugs will have responders and non-responders. In rare cases, there is a pre-auth that has to be done or step therapy for very expensive drugs - think five figure chemo drugs. Belviq is not in this category.
2. Payers are scared to death of the obesity epidemic. Cost projections for the comorbidities (associated diseases) are mind-numbing. CDC estimates it to be ~$500 billion or higher PER YEAR by 2030.
3. Yes, serotonin drugs can be tricky. But, there are already tens of millions of prescriptions every year for drugs that hit these receptors on the market that are much less clean with regard to their targets. Physicians know how to use these and what to look for. Belviq actually is a very precise drug which is why we did not see many issues in the clinical trials. Hence, FDA approval.
4. And finally, the 5% number is very misleading. Among responders(~42%) the weight loss was much higher and clinically beneficial by all standards. And please remember - this was for the FIRST YEAR. I expect that patients may be on these drugs for years. Then go off of them and then go back on. You cannot change human behaviors. People will indulge in high calorie foods. We are wired for it genetically.
These are some of the reasons why I went long ARNA. This drug meets an tremendous unmet need that will cause healthcare costs to rise to levels unsustainable. Payers want something that will help them keep the obesity level lower than current projections of 70% by 2030. It will be prescribed. Some people will respond, some won't. Payers (healthcare plans and PBMs) will pay for it because it makes financial sense.
Eisai gets over 70% of the profits for a potential blockbuster when their pipeline just fell off the patent cliff...really...they won't be incentivized?!?
A couple of points not contemplated in your article. Eisai is on the hook for ~$1.2B in royalty payments if the drug sells reasonably well. This should be taken into account when looking at the current market cap of the company. Also, if big pharma waits for sales numbers, a Rest-or-World partner Agreement may already be inked. Not much point in a buyout at that point is there? So, it is my opinion when looking at ARNA from an M&A perspective that one could certainly predict that a relatively safe drug that combats the largest public health issue in the world and helps 42% of the patients that take it might be a good buy. Especially if they could recoup $1.2B + the profit from NA sales. As a pipeline-starved pharma with lots of cash on hand would I want to wait until someone else bought them or until ARNA sold the ROW rights? I am thinking that they would wait until FDA approval to make sure that the Agency was open to drugs in this space again and then make sure that I was first in line. As Jack Leif said on the last conference call with a chuckle, "We are talking to LOTS of people".
Arena Pharmaceuticals Could Be Going On A Diet Soon [View article]
1. Only about 40% of all prescriptions yield the clinical benefit that the doctor prescribed. Payers and physicians are used to this waste and are generally expect that all drugs will have responders and non-responders. In rare cases, there is a pre-auth that has to be done or step therapy for very expensive drugs - think five figure chemo drugs. Belviq is not in this category.
2. Payers are scared to death of the obesity epidemic. Cost projections for the comorbidities (associated diseases) are mind-numbing. CDC estimates it to be ~$500 billion or higher PER YEAR by 2030.
3. Yes, serotonin drugs can be tricky. But, there are already tens of millions of prescriptions every year for drugs that hit these receptors on the market that are much less clean with regard to their targets. Physicians know how to use these and what to look for. Belviq actually is a very precise drug which is why we did not see many issues in the clinical trials. Hence, FDA approval.
4. And finally, the 5% number is very misleading. Among responders(~42%) the weight loss was much higher and clinically beneficial by all standards. And please remember - this was for the FIRST YEAR. I expect that patients may be on these drugs for years. Then go off of them and then go back on. You cannot change human behaviors. People will indulge in high calorie foods. We are wired for it genetically.
These are some of the reasons why I went long ARNA. This drug meets an tremendous unmet need that will cause healthcare costs to rise to levels unsustainable. Payers want something that will help them keep the obesity level lower than current projections of 70% by 2030. It will be prescribed. Some people will respond, some won't. Payers (healthcare plans and PBMs) will pay for it because it makes financial sense.
Arena Buyout Rumors Are Overblown [View article]
Arena Buyout Rumors Are Overblown [View article]
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