Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Arena Pharmaceuticals, Inc. (ARNA): An Obesity Drug Stock to Fatten your Portfolio?

Page 1 of 2

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) shares fell after the company announced the June 11 U.S. release of its obesity drug BELVIQ — but that’s not necessarily a bad thing. Over the previous week, investors had bid the drugmaker’s shares above $9 in anticipation of the news; when it came, they sold. But with BELVIQ headed to shelves soon, there are a number of reasons why investors still expect good things for the drug company.

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)

Milestone reached

The U.S. launch of BELVIQ triggered a $65 million payment to Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) from its partner, Eisai. Arena may also earn $1.19 billion in purchase price adjustments, depending on yearly sales levels for BELVIQ. Comparing Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)’s $1.89 billion market capitalization to that payment illustrates how inexpensive Arena’s shares are relative to future sales. If the billion dollar sales level is reached, Arena would be worth just 1.5 times sales. Established pharmaceutical companies like Merk and Pfizer have a price-to-sales ratio of 3.

Initially, Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) will earn 31.5% of Eisai’s net product sales for BELVIQ. After those net sales top $750 million, Arena’s cut of subsequent proceeds rises to 36.5%.


VIVUS, Inc. (NASDAQ:VVUS) beat Arena to market with its own obesity drug, Qsymia. But shares bottomed at around $10 in March as disappointment in weak sales, high promotional costs and operational inefficiencies were revealed.

Investors incorrectly related the troubled launch of Qsymia to Arena’s upcoming launch. If anything, Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) has an edge over VIVUS, Inc. (NASDAQ:VVUS), because Arena will have the support of physicians and pharmacists during the initial launch. Conversely, VIVUS, Inc. (NASDAQ:VVUS) is exploring partnerships with pharmaceutical companies to gain greater support from primary care physicians.

After recovering steadily, management issued $200 million in convertible senior unsecured 7-year notes. Purchasers may also buy $30 million more. The funds will be used for a capped call transaction, which reduces shareholder dilution, and the rest used for drug development and commercialization.

ARNA data by YCharts


Arena does not want patients who lose less than 5% in weight within 12 weeks to continue treatment with BELVIQ. This may be viewed as a negative for sales, but the company wants reimbursement to be given only to those who receive a benefit. Initial sales may slow after 12 weeks, but in the long run, motivated patients will remain in treatment.

More drugs in pipeline

If BELVIQ were its only drug, then Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) would not be a good investment. But the company’s also developing several other promising compounds.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!