Where Does Arena Pharmaceuticals Go From Here Now Following Its Q1 Results

Lowering first quarter loss does not mean that the company would have an easy time ahead due to toughening competition and sales volatility.

Arena Pharmaceuticals (NASDAQ:ARNA) has announced its first quarterly results for this year, reporting a net loss at $24.3 million, lower than $25.3 million of the same quarter a year ago. The loss per share was clocked in at $0.10, compared to $0.12 to the same quarter a year ago. Meanwhile, revenue was reported at $12.26 million, compared to $6.81 million a year ago.

However, the first quarter results do not serve a cause for celebration. Arena managed to trimmed down their losses, albeit marginally, but it is not providing the bigger picture – sales of its medicines are flattening out, and it is getting highly competitive out there in the health care services sector, aside from political factors. For example, Arena’s sales of anti-obesity drug, belviq, has flattened out for the past several weeks, while its competitor, Origen, doles out is product, Contrive, in the market.

Sales have increased by a mere 1%, rising from 14000 scripts to less than 14500 scripts. At the same time, Contrive has seen its sales boom from more than 10000 drug scripts to less than 13000 scripts, a boost of 3.6% growth. Actually, the entire pharmaceutical sector has gone through a thrilling ride, and Arena’s products have failed to take advantage of it, giving room for competitors to grow.

The major worry here is what happened to Qsymia, a product of Vivus, might also happen to Belviq, though that has not to say that it will surely happen but there is no ruling out the possibility. Ever since Qsymia hit its peak last year, its equity has gone flat ever since, even the introduction of a new product in the market. Not that Belviq may suffer the same fate, but its sales growth has not been impressive either.

Based on the overall market situation, Belviq seems like it is indeed losing ground to Contrive, as the sales volume gap in terms of absolute sales is also increasing as well. It was 1600 scripts earlier this year and that has now increased to 3900 in March. It is likely to grow from thereon. Finally, Belviq may have a 37% market share, but Contrive is catching up fast with a market share of 33%.

So what is for food and drug producer to do? Clearly, they need to revamp the brand image of Belviq and try to match up with Contrive’s capabilities, which demand more time and investment on it. The problem is that the product is still relatively young, which it leaves many investors wondering to level it to the second phase. How long will Arena hold on to this product or decide to elevate it to the next level is yet to be seen, especially when the gap between the timing of the trials and the gap in cash in hand is taken into account.