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Arena Pharmaceuticals, Inc. Message Board

  • tiger_josef tiger_josef Aug 17, 2013 9:44 AM Flag

    I just read Spencer's article on SA for the first time in a very long time and here is a major flaw in his assumptions

    Spencer states:
    "The tracking blue path is a model on how Eisai (ESALY.PK) can arrive at $150 million in gross sales by the end of the year. More realistically, in my opinion, sales are pacing toward between $60 million and $70 million (gross) by the end of 2013 and the $150 million goal will not be met. ... The only way the $150 million is attainable at this point is via a hockey stick growth pattern. It is important to understand that gross sales is the sales number prior to discounts and adjustments. The blue lines track Eisai's "hopeful aspirations" goal, not Arena's goals."

    A big mistake in the above statement is that S.O. assumes that the $150 Million Gross is directly related to the Script Number. If he just stopped and thought one more second, he probably would not do that.

    Based on the Last Quarter Report by Eisai between 06/11/2013 (when B was on the market) until the end of the Month where the Actual Cumulative NEW Scripts are as following:
    Actual Values
    ============
    Date (Fridays) | Wkly nRX | Cumulative nRX
    6/14/2013 | 1,175 | 1,183
    6/21/2013 | 2,104 | 3,287
    6/28/2013 | 2,573 | 5,860

    Eisai reported a GROSS revenue by the End of June of 50,000 bottles = 50k x $200 per bottle = $10M

    By comparing the $10M to the Actual Scripts it is too OBVIOUS that Eisai CLAIMS the Revenue when the Pills are delivered to the Wholesaler and NOT when the pills are Delivered to the Patient thru the Scripts.

    IMO, there is about a 45 day lag between when the Pills are Delivered to the Wholesaler (i.e. Eisai Gross Revenue) to the time the same pills are actually delivered to the Patient through the Scripts.

    Therefore, it is my Conclusion that based on the Current NEW RX's (nRX) reported by Symphony with an adjustment of only ~ 15% for under-reporting and 40% Dropout Rate in 12 weeks. The $150 Million Gross Revenue by Eisai will be reached by 12/31/2013

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    • The ultimate driver in demand for Belviq will be social media and word of mouth, IMO. The pace of this is hard to predict, but will rely primarily upon success one person at a time. Therefore, I believe the few testimonials recorded on this message board are exceptions to the rule of results. Most people will not be losing 20 pounds within the first 3-4 weeks of taking Belviq, but will be responding sufficiently to continue taking it after 120 days. This time frame has not yet been met. However, people who are responders will be reporting their status on Facebook, Twitter, and other social webs and THAT will become the stimulus for an acceleration of demand. The work of Eisai was to prime the pump at the beginning and was limited, but by the end of October all the factors will be in place for a major buildup of demand.

      I also believe that both mutual funds and medical services insurers will be watching this data and deciding that Belviq is working and a real force in obesity weight control and demand will grow for shares and scripts alike.

      ryt2

      Sentiment: Strong Buy

    • I think Spencer is a Puppet who writes what they tell Him to. Just like the rest of the HF Puppet Dorks.

    • Spencer is obsessed with this $150M number. He still does not get it that it was not an official guidance number. Yet he continues to beat it like a red-headed monkey.

      Regarding your post. It if a fact that Arena uses POP to record revenue. POP or "Point of Purchase" is when the Distributor is shipped product. POS accounting would be that revenue is recognized when the consumer buys the product in this case Belviq. Since there is a lag time in the reporting of actual sales (scripts filled and paid for); it makes more sense for both Arena and Eisai (assuming Eisai is using POP which your analysis indicates) to account for revenue. Both Eisai and Arena should set up a reserve account that would be some percentage of sales for any possible returns from the Distributors.

      This subject matter is imo too complicated to discuss here in how it really works. Your 45 day lag time equates to 8.1 turns for the Distributor. The drug distributor's like to have turns of 12 or greater. As more scripts increased and are filled, that should reduce the lag time and increase the Distributor's turns or the Distributor to reach their "turns" objective which is an important criteria for a Distributor for any drug, they reduce the amount of inventory they buy.

      In order for Eisai to make the $150M gross revenue number, 750K bottles would have to be shipped to the Distributors by Dec. 31st, 2013. My guess is that the initial 50K bottles is depleted and probably another 50K have been shipped - maybe more. Which means between now and December 31st, approximately 600K to 650K bottles would have to be shipped. In addition, in advance of DTC starting, Distributors would probably be willing to increase inventory levels to meet increased demand from pharmacies, that should increase Distributor buying by year end and probably enough to get to the $150M gross revenue number.

      Sentiment: Strong Buy

      • 3 Replies to jdsstevens55
      • Good analysis. This makes sense and also points to a more gradual startup volume curve than an exponential curve designed to end up at an arbitrary number.

        BTW..I am not upset with Spencer's analysis. I really do not get a sense that he is biassed agains ARNA. He is making some money from Seeking Alpha for the number of hits to his messages and of course, the more messages is better in generating hits. People just learning about Arena will be also visiting his earlier messages.

        ryt2

        Sentiment: Strong Buy

      • Jim, very informative post.

        Ref. "My guess is that the initial 50K bottles is depleted and probably another 50K have been shipped - maybe more."

        I don't think you are far off from what is currently projected
        As of Last Friday 8/16/2013
        Cumulative number of 60 pill Bottles delivered to the Wholesaler is estimated at ~ 109,329
        Cumulative number of 60 pill Bottles consumed by Patients is estimated at ~ 35,457

    • You are correct Tiger. Easai will reach target.

    • In a nutshell, what you are saying is that the script curve is likely to be lagging the income curve by roughly 30-45 days...? And, it is possible that stocking the shelves will take place in a 'bolus' mode as opposed to an IV drip?

      • 1 Reply to sp500chartdotcom
      • Yes SP500. The post in the bottom of this thread has all the details how the conclusions in the first post (also in this thread) were made. It details the difference between the consumed product (related to scripts) and the Wholesaler purchase of the product is when Eisai claims the gross revenue.

        Excerpt from the last post
        ========
        Abbreviations:
        CWSDB = Cumulative Wholesalers Distribution 60 pill Bottles
        CCB = Cumulative Consumed 60 pill Bottles
        Date | CWSDB | CCB
        6/30/2013 | 43,747 | 2,701
        9/30/2013 | 213,177 | 101,792
        12/31/2013 | 760,092 | 423,672
        ==========
        Here is some numbers to ponder
        1) The Quarter Ending 06/30/2013, the Model has 43,747 Bottles purchased by the Wholesalers which is very close to what Eisai Claimed as Gross revenue which was 50,000 bottles.

        2) The Quarter Ending 9/30/2013, the Model has 213,177 Cumulative Bottles Sold to Wholesalers MINUS the 50,000 Bottles = ~ 170,000 Bottles to be claimed as Gross Revenue by Eisai.

        3) The Quarter Ending 21/31/2013, the Model has a Cumulative Sold bottles to the Wholesalers = 760,092 Bottles x $200 per Bottle = $152,018,400 Cumulative Gross Revenue by Eisai which equates the $150M guided projection by Eisai.

    • Thanks Tiger...ARNA is an INVESTMENT.....Most here do not get it. This company is going to be very, very profitable and as a result the pps will eventually reflect this.
      GLTY

      Sentiment: Hold

    • whether they are paid when the product reaches the wholesaler, or when the patient orders the script, ultimately, there must be sufficient script demand to pull through the wholesaler inventory, or there will be no need to build the inventory, wholesalers will reduce their orders. Watching new and refill scripts is the best predictor of current and future sales/demand.

      The larger issue is that Eisai is just too small and not investing enough resources in reps, marketing, advertising and market access/reimbursement.

      • 2 Replies to bioimmunomabman
      • Eisai is more than large enough. Since being invested in Arena, I have read nothing but negative posts by you that always turn out wrong. Now you are at it again.

        You claim to be a Bio expert, well if you were really expert, you would know the fact that the FDA does slow down any DTC advertising for new drugs. That is not an Eisai issue and in my more intelligent opinion than you could ever have, they will start DTC before the end of this year.

        Not investing enough in resources. Another absolutely silly comment not backed up by anything but your own wrong FUD opinion. You have no clue. I know tell me you worked for a pharma company, certainly not doing sales.

        As usual you will be proven wrong 20X over. As usual you will never admit to being wrong about your silly and not thought out comments. Go play some golf, get busy or whatever it is that you do.
        Certainly would be more productive than any value you add other than to complain, be negative and always wrong!

        Sentiment: Strong Buy

      • bioimmun....,

        Ref. "whether they are paid when the product reaches the wholesaler, or when the patient orders the script, ultimately, there must be sufficient script demand to pull through the wholesaler inventory, or there will be no need to build the inventory, wholesalers will reduce their orders. Watching new and refill scripts is the best predictor of current and future sales/demand."

        Oh really, no kidding and when did I ever SAY that watching the New scripts is NOT the best way to predict sales / demand. I only spent over a year perfecting the Model that I have and you come back responding with a statement like this. I guess I Spent all my energy on this one issue because I believed that the new scripts is not a good predictor.... go say that to someone else.

        Ref. "The larger issue is that Eisai is just too small and not investing enough resources in reps, marketing, advertising and market access/reimbursement."

        What qualifications do you have to determine whether Eisai is big or is not bug enough in Delivering a BLOCKBUSTER Status for Belviq.

        PS: I am not sure why I smell a Spencer Osborn in you....

    • Tiger outstanding analysis.....have you considered writing for SA? Not sure what that would entail.....but your perspective is sorely needed....

      Sentiment: Strong Buy

    • Here is the Projected Number of Bottles Delivered to the Wholesalers based on what I keep posting in the Projected versus Actual New RX (nRX) by Symphony posts

      Assumptions:
      1) 15% is added to the weekly New RX (nRX) in estimating the Projected weekly Total RX (tRX)
      2) The 4 weeks Dropout Rate is estimated at 10%
      3) The additional 12 weeks Dropout Rate is estimated at 30% for a total of 40%
      4) The Cumulative Wholesalers Distributed Bottles is projected at 45 Days ahead of the Actual Consumer Consumption

      Abbreviations:
      CWSDB = Cumulative Wholesalers Distribution 60 pill Bottles
      CCB = Cumulative Consumed 60 pill Bottles
      Date | CWSDB | CCB
      6/30/2013 | 43,747 | 2,701
      9/30/2013 | 213,177 | 101,792
      12/31/2013 | 760,092 | 423,672

      760,092 Bottles x $200 per Bottle = $152,018,400 Gross Revenue by Eisai
      ========
      Date | Cumulative Consumed Bottles based on Scripts
      6/14/2013 | 243
      6/21/2013 | 1,130
      6/28/2013 | 2,701
      7/5/2013 | 4,995
      7/12/2013 | 8,035
      7/19/2013 | 11,825
      7/26/2013 | 16,413
      8/2/2013 | 21,846
      8/9/2013 | 28,176
      8/16/2013 | 35,457
      8/23/2013 | 43,747
      8/30/2013 | 53,107
      9/6/2013 | 63,602
      9/13/2013 | 75,228
      9/20/2013 | 87,936
      9/27/2013 | 101,792
      10/4/2013 | 116,865
      10/11/2013 | 133,228
      10/18/2013 | 150,957
      10/25/2013 | 170,133
      11/1/2013 | 190,843
      11/8/2013 | 213,177
      11/15/2013 | 237,230
      11/22/2013 | 263,102
      11/29/2013 | 290,901
      12/6/2013 | 320,737
      12/13/2013 | 352,727
      12/20/2013 | 386,996
      12/27/2013 | 423,672

 
ARNA
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