Arena Pharmaceuticals, Inc. ARNA is expected to report second-quarter 2015 results on Aug 5 after the market closes. Arena Pharma’s performance has been mixed over the last four quarters with the company missing earnings expectations in two of the last four quarters and surpassing in the remaining two. However, the average earnings surprise over the last four quarters is +16.41%. Let’s see how things are shaping up for this announcement.
Factors at Play
Arena Pharma’s first quarter results were mixed with the company reporting a narrower-than-expected loss but revenues lagging expectations. Sales of Arena Pharma’s obesity treatment Belviq were up 73.7% sequentially in the first quarter of 2015. As per IMS Health, first quarter 2015 total prescriptions for Belviq increased approximately 13.7% from the preceding quarter to about 169,000.
Arena Pharma and partner Eisai ESALY are working on driving Belviq sales through promotion initiatives. Eisai has been focusing on increasing prescription refill rates including through its pay no more than $75 savings card and on improving insurance coverage for Belviq. Second quarter 2015 Belviq scrips will also reflect the Feb 2015 launch of the product in South Korea.
However, competition in the obesity market has gone up given the presence of new entrants like Saxenda and Contrave. Moreover, VIVUS, Inc. VVUS, one of the players in the obesity market, recently announced that the branded obesity market in the U.S. has grown well below expectations reflecting factors like physician caution and reluctance to prescribe, experiences with prescribing other agents, reimbursement issues and lack of widespread consumer awareness.
Meanwhile, Arena Pharma and Eisai are looking to re-submit Belviq in the EU around Mar 2016. The companies are also evaluating Belviq for additional indications like weight management in combination with phentermine and smoking cessation. An update should be available on the second quarter call regarding the company’s plans for the weight management indication. Additionally, the companies are looking to submit a new drug application for a once-daily extended release formulation of Belviq in the U.S. later this year.
Apart from Belviq, investors will also be focused on pipeline updates from the company. The pipeline includes APD334 (phase II proof-of-concept study initiated for ulcerative colitis), ralinepag (phase II – pulmonary arterial hypertension) and APD371 (pain and fibrotic diseases – multiple ascending dose study to commence later this year) among others.
Earnings Whispers?
Our proven model does not conclusively show that Arena Pharma is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.
Zacks ESP: Earnings ESP for Arena Pharma is +6.67%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are a loss of 14 cents and 15 cents per share, respectively.
Zacks Rank: Arena Pharma carries a Zacks Rank #4 (Sell). We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here is a company you may want to consider as our model shows that it has the right combination of elements to post a beat this quarter.
BioDelivery Sciences International, Inc. BDSI has an earnings ESP of +6.45% and carries a Zacks Rank #3 (Hold). It is set to report second quarter results on Aug 10.
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