A Good Time to Make This Obesity Bet

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The obesity treatment market is a highly lucrative market due to the obesity epidemic hitting the States and the toll it is taking on medical insurance companies. Arena’s (NASDAQ: ARNA) Belviq and Vivus’s (NASDAQ: VVUS) Qsymia have already received FDA approval. Orexigen (NASDAQ: OREX) is testing their drug Contrave in a cardiovascular trial, and success in this trial can result in another obesity drug approval. Arena is holding a conference call on March 4 before the market opens and launch news can positively impact the stock price. Orexigen and Vivus investors will closely monitor the conference call as the event impacts the entire industry.

Arena Pharmaceuticals

Arena Pharmaceutical is a biopharmaceutical company involved in the discovery, development and commercialization of biopharmaceutical products. It primarily focuses on G protein-coupled receptors in the areas of metabolic diseases, CNS, inflammatory and cardiovascular. Arena has recently received FDA approval for the use of its weight loss drug Belviq (Lorcaserin /APD-356). The drug has been approved for patients with a BMI exceeding 30 and is also allowed for patients with a BMI exceeding 27 if they have high blood pressure or diabetes (type 2). The table below shows the various candidates of the company and the development stages of the respective candidate. The company has only Belviq approved; two candidates are in Phase I and the other two are still in preclinical development. The table below shows Arena’s Pipeline, this information is also available at Arena website.

Program

Target

Development Stage

BELVIQ® (lorcaserin HCl)

5HT2C Agonist

FDA Approved

Chronic Weight Management

   

APD811

PGI2 Agonist

Phase 1

Pulmonary Arterial Hypertension

   

Temanogrel

5HT2A Inverse

Phase 1

Thrombotic Diseases Agonist

   

APD334

S1P1 Agonist

Preclinical

Autoimmune Diseases

   

APD371

CB2 Agonist

Preclinical

Pain

   

 

Belviq

As the table above shows, Belviq is the only Arena drug which has received FDA approval so far. Therefore, the valuations of the company are linked with the investor perception of Belviq's potential. The company is set to hold a conference call before the market opens on March 4, and investors are expecting that a schedule for the US commercial launch of Belviq will be provided. The primary delay in the launch was the DEA scheduling, which had to assess if Belviq could be abused by users. In a recent statement, the DEA has scheduled it as a class IV substance, i.e. low risk of abuse. This was a massive win for Arena investors as it allows a wider and easier access to Belviq.

Launch

The market is expecting Belviq to be launched in the first half of March as the company has already issued the pricing of the product. The company has recently received the price of this highly anticipated product. Belviq has been priced at $199.50 for a month’s supply, i.e. 60 tablets. Its primary competitor Qsymia is already available in the market and is available at a price of $160 per month. These price tags make Qsymia approximately 20% cheaper than Belviq. The table below compares the effectiveness of each drug and the potential risks associated with their use.

Drug

Effectiveness

Side Effects

Availability

Price

Belviq

Average weight loss 13 pounds

 Upper respiratory tract infection

Sinusitis

Serotonin syndrome

Expected 1H-March

$199.5/month

Qsymia

Average weight loss 23 pounds

Metabolic acidosis

Cardiovascular risk

Birth Defects in Pregnant Women

Yes

$160/month

  

As the table above shows, Belviq is a much safer obesity drug and has also been priced higher by Arena. On the other hand,  Qsymia is much more effective (44%) as compared to Belviq and is available at cheaper rates. According to a paper published by Dr. Suzanne Oparil in the American Journal of Cardiology the use of Qsymia led to reductions in blood pressure with increases in dose leading to higher improvements in patient blood pressure.

Bottom Line

The stock of Arena can jump if the company announces a launch date for Belviq. The drug will face tough competition from the cheaper Qsymia, but Belviq has the advantage of a better sales channel because Qsymia is restricted to specific mail order pharmacies only. In the future, Belviq and Qsymia will both face competition from Contrave, and others will also like a piece of this highly lucrative market. The stock is currently trading at 15% below the mean sell side target price of $9.5 and could appreciate on Belviq's market launch. 


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