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Arena Pharmaceuticals, Inc. Message Board

  • iago4466 iago4466 Jan 13, 2013 9:41 PM Flag

    What is EMA approval worth?

    A couple of people on the board tonight have exchanged opinions about whether EMA approval is already baked in. It's an interesting point... Ignoring fantasy numbers, and really long term projections, the question is this: What's the added value of European sales if they were at the same level (per population) as in the USA? Once US approval was in the bag, and after the Qsymia approval then took place, the PPS stabilized around an average of something like $8.50 or so. That's what the market valued the company at, based on projected US sales (and yes, I know I am probably placing too much faith in the market, ignoring manipulation factors, and that there was some share dilution etc, etc..., but I am after back of the envelope numbers here). Pre-FDA, the company was trading around $1.50, so let's say the market gives a $7 PPS value to US sales post-FDA. So, would the market give a similar value to similar sales figures in a population of a similar size (i.e., Europe)? Or did some of the post-FDA rise assume that European approval would be likely to happen, and so was partially baked in? If the European sales are not baked in at all, the PPS could stabilize around $15 or so, but if it was baked in at least partially, the PPS would be a bit lower. Remember, I'm talking about back of the envelope stuff here, and discussing ONLY the European sales expectations. Thoughts from the thoughtful crowd?

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    • Pop of Europe: 740 million
      Pop of USA: 311 million

      Anyone who things EU approval is only worth a buck a share is insane IMO. EU approval DOUBLES the ARNA market with NO Q COMPETITION.

    • I would bet we float close to $13. Not that it reflects appropriate value but I think WS and analysts are missing the boat completely on one simple thing. Obesity is a result of overheating for the most part if you eliminate various medical conditions like thyroid issues etc. They are comparing the market penetration to fat burners and blockers which for the most part have had significant side effects. Overeating is a compulsive behavior. Correct me if I'm wrong but there is no basis for comparison to a drug that removes the compulsion to overeat? That won't be resolved until we see script results hence I think the valuation will not be properly reflected upon approval.

    • While I believe there is some optimism baked into the price right now - arna is above 2 billion market cap and that's pretty high for a company yet to sell one pill - I do believe that getting EU approval will have a profound effect on the stock price. All those shorts out there are in denial. They apparently believe the FDA should have never approved belviq, they believe the vvus has the superior product regardless of the side affects or the generic factor, they believe that the EU will shoot down belviq because it doesn't work, and they believe US sales will flop harder than vvus sales. And if you believe what I just wrote, you should short the stock as well.

      However, if you believe the opposite, as I do, then you believe we're just at the beginning of this story. 2012 was an amazing year for arna. 2013 is a story that every analyst and hedge fund manager who spoke and bet against arna will be looking back on and scratching their heads wondering how they got this one sooooooo wrong.

      Sentiment: Strong Buy

      • 1 Reply to matese16
      • EMA approval will make BELVIQ an INTERNATIONAL obesity drug. It has profound effects on MEDICAL COMMUNITY which after all will write all the prescriptions. As a practicing physician,
        I will not write prescription for Q which was rejected by EMA.. It is not just sale but a brand drug cannot have that kind of reputation.
        David, MD

    • Iago,

      Excerpt from one of my old post using a 50% Discount Rate instead of the Standard 25% Discount Rate on the Projected FIVE year Revenues.

      5 Year Total Revenue at Y2013 with 10% Expected Rate of Return and a 50% DISCOUNT RATE = $7,715,564,130
      Present Value of Market Cap = $7,454,651,334
      Total Number of Shares Outstanding = 235,000,000

      Present Value per Share based on ...
      1) US Sales = $9.49
      2) European Union Sales = $10.36
      3) Canada and Remaining North American Continent Sales = $5.85
      4) South American Continent Sales = $5.35
      5) South Korea Sales = $0.67

      Notice based on US Sales the number is $9.49 which is very close to the current share price.

      The corresponding EU value is $10.36, so here I am going to also be more conservative and cut say 1/2 for the EU approval.

      Therefore, the price with EU Approval = $9.49 (US) + $10.36 x 50% = ~ $14.50 (conservative)

      Sentiment: Strong Buy

      • 3 Replies to tiger_josef
      • Tiger, as always you have great DD and work that goes into your assement!

        But on this one I think you are a little short. WS has valued ARNA at approximately 50% fair vaule of the US market. However, with Belviq being the only novel drug being introduced to EU, don't you think that will influence WS to value Belviq higher? At a vaulation of 75%, I think value of pps after EU approval = $9.49(US) + $10.36x75% = ~$17.26.

        JMHO, and thanks again for all of your hard work on this stock!

        Sentiment: Strong Buy

      • Thanks Tiger, as always you have gone into a topic in more detail than I ever do, but it's reassuring that your more calculated estimates are in the same ballpark as my envelope-back scribbles. Of course with the way this stock is manipulated, it may take a while post-EMA approval to settle at a "fair average" value. But I guess we are used to that... Thanks again!

      • If EMA comes this week when could we expect Europe Sales to begin? No named marketing partner.

        Sentiment: Hold

    • Iago

      You are right on target. The approval equals 14 to 16 range.

      Sentiment: Strong Buy

      • 1 Reply to boddu001
      • I think a European partnering deal will be announced within a short time after approval which will be an additional catalyst for an increasing share price. ARNA has held off doing a European deal until after approval in order to make the deal a whole lot more lucrative with a higher upfront payment, IMO.

        Sentiment: Strong Buy

    • JMHO that EMA is now baked in by bringing the PPS to the high nines.

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