We think the agreement economics for Arena and our stakeholders are compelling.
Arena Pharmaceuticals' Management Presents at Deutsche Bank dbAccess Health Care Conference (Transcript)
Dominic Behan - Chief Scientific Officer and Co-Founder
Transitioning now to speak a little bit about the agreement economics that we have with Eisai, we think the economics are compelling. We’ve received $55 million in an upfront payment, this been received. We also received an additional $20 million milestone – a $20 million milestone and that was for achieving the diabetes information and the prescribing information from the FDA. And very soon we’re due to receive a $65 million milestone when we deliver launch material to Eisai which is imminent in that regard.
In terms of these economics and how this works, we will manufacture BELVIQ in Switzerland. We will then sell the product to Eisai at 31.5% to 36.5% of U.S. net sales. And we’re also eligible to receive an additional $1.2 billion in one-time purchase price adjustment payments as we hit certain sales milestones. And in addition we are eligible to receive an additional $50 million in regulatory and development milestone payments.
But very important we are responsible for only 10% of the CVOT, the cardiovascular outcome trial costs, Eisai pays 90%. And we share 50-50 the cost of certain pediatric development expenses etcetera. And also it’s important to point out that Eisai pays 100% of all the commercial infrastructure and all the costs associated with the commercialization of the compound. So, we think the agreement economics for Arena and our stakeholders are compelling.
A little bit here about the mechanics of how this will work. So, when we hit $250 million in net sales, we will receive 31.5% of that $250 million, which is approximately $80 million. In addition because we have hit that level, we are due a $30 million milestone as well as $25 million adjustment which is about – which is $55 million, so $80 million plus the $55 million gets us to approximately $134 million. So, when we hit $250 million
This is called speculation. Stock can rise quickly on speculation if enough traders believe it to be true but ARNA is not entering a speculative phase. ARNA has entered a show me the hard data of scripts phase. There is only sideways or down in the pps of ARNA for now. The days of pumping or bashing in an attempt to move the pps on speculation alone are coming to a close.
Tod I see little downside risk, sideways and upwards yes- Arena has reached a new phase as a company with enormous potential and rich with cash. Even with slow sales the current price will hold if the sales are better than expected we have the benefit of a short squeeze with a stock that is way undervalued. There’s no reason why Arena shouldn’t be trading at 15 to 18 dollars conservatively right now.
It was apparent he did not think the pipeline value was currently figured in the share price from the Q & A section of the presentation. Any buy out offer will be......what is that value worth? Unknown.
The average cost of bringing a new drug to market is $1.3 billion and some major pharmaceutical company costs have rocketed to at least $4 billion with a high failure rate. So the success of Belviq is paramount to Arena towards funding R&D and the cash burn is going to be enormous. For that reason I’d much prefer to see a further collaboration or a buyout to fund the pipeline.