Memorandum
Arena reported its 4Q14 update today in a call led by CEO Mr. Jack Lief. As recorded by Eisai, Belviq (lorcaserin) revenues grew 33% year-over-year (YOY) to $10 million (of which Arena received $3.2 million) in 4Q14 and declined 41% sequentially from 3Q14’s $16.8 million. It was disappointing to see this sizable sequential decline although perhaps not too surprising given some of the previous quarter was likely inventory stocking. Management reported 149,000 Belviq prescriptions in 4Q14, representing 152% YOY growth and 4% sequential growth; notably, management also commented that 2015 has so far seen positive prescription trends thanks to expected high seasonal demand and strong uptake of Eisai’s new savings card (which was launched in January and enables uninsured patients to pay no more than $75/month – it’s not a J&J card that enables patients to pay no more than $10/month, but it’s a lot better than paying for a full prescription without any help). With regard to the company’s lifecycle program for Belviq, management noted that Arena anticipates meetings with the FDA, likely in mid-2015, to discuss the next steps following positive results seen from both Belviq’s smoking cessation trials and studies investigating co-administration of lorcaserin and phentermine. The company has also completed dosing in the registration trials for Belviq’s once-daily extended release formulation and is currently receiving feedback from the FDA on the formulation’s planned NDA application. In addition, Arena highlighted that Korean company Ildong Pharmaceutical has begun marketing efforts for Belviq in South Korea, where the drug was approved in February. For more background, check out our coverage of Eisai’s F3Q14 (4Q14) update as well as our 3Q14 Arena/Eisai update.
Questions and Answers
Q: With respect to Belviq, congrats on South Korea – what are some of the other potential regulatory overseas geographies that we could see with approvals this year?
A: As you know, Eisai has filed in Brazil and Mexico. And so that is a potential for this year. I'd say potential because those jurisdictions are very different than the US or Europe, which give you that PDUFA date in the US or those 210 days in Europe. So it's sort of an open-ended review and it remains to be seen if they'll get it done this year, but we are hoping.
Q: Can you give us an update on timing for these meetings with the FDA around smoking cessation and combination with phentermine and a little bit of an update on what your goals are there in terms of your ideal trial designs?
A: So both smoking and combo are on a similar path and what we need to do is finalize development strategy for those and then speak to the FDA. Then based on any comments we get, we would finalize and initiate. In terms of smoking, we are looking at an FDA meeting sometime potentially in the second quarter; same thing with combo for the most part. Part of this is making sure that we have finalized our plans and have had the appropriate discussions with Eisai to make sure that we are all on the same page before we move forward.
Q: With respect to gross to net, can you comment around your gross to net expectations for 2015 or if not, maybe just what you have seen so far in the first two months of the year?
A: We did announce for the full year that it was at 47%. If you do the math, the quarter was 58% and that really related to the introduction of the savings card program, the “pay no more than $75.” In terms of 2015, that should moderate out. Now the wild card is that Eisai has a really high-performing reimbursement group. And I expect to have good news along the year in terms of additional reimbursement, which would reduce that gross to net discount over the year.
Q: As a follow-up on the smoking cessation path forward, based on the meetings you had or discussions you had with opinion leaders, can you maybe talk broadly to about what you think could be similar or different to other phase 3 programs of smoking cessation drugs? And why do you think you can determine a differentiated label for lorcaserin?
A: Keep in mind that at least half of our enrolled patients had tried other smoking cessation drugs and they failed. So I think intrinsically, a new drug could address some of the issues that old drugs did not. Having said that, it's variable, and I think having a weight neutral or slightly weight negative effect could be a good thing because other drugs, as you know, cause some weight gain and a lot of patients don't want to stop smoking because they are afraid of gaining weight. And some patients actually stop smoking and gain weight. They then go back to smoking, so that they can lose that weight. So I think there's a benefit from lorcaserin in that regard. We'll see once we have moved into our next set of studies.
Q: How do we think about the redemptions from the free trial voucher portion of the revenue? Is this something that will remain or will it become propositional to prescription growth or is it not that predictive?
A: The free goods and the 15-day voucher redemptions have been going down recently. And the other aspects, these savings cards, I'm sure have been increasing. But that's really up to Eisai, how they are going to be doing this. I think Eisai has put a really nice price point in place there and we'll see whether that has eaten into the vouchers. But I don't think it's necessarily a good indicator of prescriptions. And just recall that we get paid cost of goods sold related to that. Eisai does have a pilot sampling program as well, and so that is not included in IMS data. So that's something in addition to the numbers that we see in terms of prescriptions.
Q: For the guidance you provided for R&D for next year, the $114 million to $122 million, can you give us a rough idea how much of that is going to be for Belviq vs. the pipeline programs?
A: We haven't given that breakdown but I will tell you that that does include the CVOT study, which is quite expensive overall and our 10% share is not inexpensive. So that includes that. It also includes the smoking cessation study, which we'll see if that gets included as well, but we haven't given that breakdown. The total overall was roughly in the $56 million that I gave in the script.
Q: In terms of helping us get a grasp around the South Korean opportunity for Belviq. You mentioned two numbers that I wasn't able to get right away: 27 medical professionals for Ildong and you mentioned a number of 370 general medical representatives. Is that personnel from Ildong that would be exclusively for Belviq?
A: The 27 medical professionals are dedicated to Belviq and they are dedicated to seeing obesity specialists, but they also have a larger field force. So the larger field force is the 370 general medical representatives that will have Belviq in their bag.
Q: Can you give an update on the insurance coverage?
A: It's still roughly 70% of private lives are covered according to Fingertip Formulary. Now, it is a little bit less than that based on how they calculate it, but it is roughly right around 70%. Again, Eisai's group is a really well performing group of players.
Eisai has been focusing also on the mega employer, so J&J, Ford Motor Company, Home Depot, companies like that as well. They don't show up in that 70% number, I don't believe.
Q: You mentioned you had a smoking cessation meting with experts. Any comments from them that's surprising to you or are all their comments with expectation?
A: Not to get into too much detail, I think we were very happy with the extent of the feedback that we received both on the study we ran as well as potential future study designs – of those features designed to increase the quit rates and things that were a little bit different in the study that we ran. So I think that all in all, it was a very good meeting in terms of looking forward to where we might go with this.
Q: Can you give us an update on the Belviq refiling in Europe and does the guidance include the $19 million payable to Eisai?
A: In terms of the $19 million payable, I gave guidance on the income statement, not on the balance sheet, so some of that will be repaid. It's reconciliation as at March 31, so it will be paid 30 days thereafter, in terms of the EU.
Last year, Eisai and us met individually with the rapporteur and then with the co-rapporteur. The purpose of those two meetings was two-fold. One was to introduce Eisai as the new regulatory lead on any resubmission, and then also so Eisai could firsthand hear about the issues that the rapporteur and/or co -rapporteur had with the application and start to figure out how to formally address those. So we've been working on a strategy since that time. We're starting to look at some additional ways to answer those questions. And so for filing right now, I believe, it could be sometime around the end of Eisai's fiscal year that's not confirmed but sometime around at the end of that fiscal year.
-- by Melissa An, Emily Regier, Maxwell Votey, and Kelly Close