Arena Pharmaceuticals, Inc. (ARNA) reported net loss per share of 11 cents in the fourth quarter of 2013, widely missing the Zacks Consensus Estimate of earnings of 15 cents. Arena had incurred a narrower loss of 10 cents in the year-ago quarter.
Arena Pharma recorded fourth quarter revenues of $6.5 million, up 236.6% from the year-ago period due to the launch of obesity drug, Belviq, and an increase in collaborative revenues. However, revenues were way below the Zacks Consensus Estimate of $36 million.
Full year loss came in at 9 cents per share, narrower than the year-ago loss of 45 cents. The Zacks Consensus Estimate for the full year was earnings of 11 cents per share.
Revenues for the full year came in at $81.4 million as against revenues of $27.6 million in 2012. Full year revenues were below the Zacks Consensus Estimate of $107 million.
Belviq Update
Arena Pharma recorded Belviq sales of $2.4 million (including $0.1 million from the 15-day free trial voucher redemption). Arena Pharma had reported Belviq sales of $2.0 million in the third quarter of 2013 – the product was launched in Jun 2013.
Arena Pharma is working on expanding the market reach of Belviq. The company expanded its existing agreement with Eisai Co., Ltd. (ESALY) in Nov 2013. As per the terms of the new agreement, Eisai will enjoy exclusive commercialization rights across the globe, excluding South Korea, Taiwan, Australia, Israel and New Zealand. To date, Eisai made an upfront payment of $60 million and milestone payment of $0.5 million to Arena Pharma.
Arena Pharma and Eisai are leaving no stone unturned to make the drug a success. Eisai doubled the size of the sales force for Belviq to approximately 400 representatives. Meanwhile, Eisai estimates that Belviq coverage in the U.S. has improved. The company estimates that the commercially insured population with coverage for Belviq has crossed 50% as compared to 30% at the time of launch.
Arena Pharma and Eisai are evaluating Belviq for additional indications. The companies are evaluating Belviq for smoking cessation as well as weight management in combination with phentermine (a 12-week pilot study initiated). Additionally, the companies are also studying Belviq's effects on diabetes and cardiovascular outcomes (CAMELLIA study). Arena Pharma has also completed a study evaluating Belviq 20 mg extended release tablets.
Arena Pharma’s pipeline includes several candidates including APD371 (phase I for pain) and APD334 (phase I for a number of conditions related to autoimmune diseases).
Other Expenses
Fourth quarter 2013 research and development (R&D) and general and administrative (G&A) expenses were up 36.5% to $19.0 million and 11.1% to $8.1 million, respectively.
2014 Guidance
Arena Pharma expects to generate the majority of revenues from Belviq in 2014. The company also expects to record $17.0 million in collaboration and manufacturing services revenues. The 2014 Zacks Consensus Estimate currently stands at $49 million.
Our Take
We are disappointed with Arena Pharma missing estimates on all fronts. We expect investors to react negatively to the news. Although Belviq sales were lukewarm in the quarter, we believe that the company will benefit from the promotional efforts undertaken by Eisai. Arena Pharma’s growth is highly dependent on Belviq, the company’s sole marketed product. The product represents significant revenue potential and its successful commercialization should drive a company of Arena Pharma’s size to profitability.
We are positive on the beefed up sales force for Belviq. We believe it can boost sales by promoting the drug to more physicians. Increased awareness should help Belviq sales to gain momentum.
Currently available therapies for obesity include VIVUS Inc.’s (VVUS) Qsymia, launched in Sep 2012.
Arena Pharma, a biopharmaceutical stock, currently carries a Zacks Rank #2 (Buy). Investors may also consider other biopharmaceutical companies like Alexion Pharmaceuticals, Inc. (ALXN), which sports a Zacks Rank #1 (Strong Buy).
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