Memorandum
Arena provided its 4Q16 and full year update in a call led by CEO Mr. Amit Munshi last month. The company reported $15.2 million in sales of Eisai-partnered obesity drug Belviq (lorcaserin), which marks a 92% YOY increase from a base of $7.9 million in 4Q15. Sequentially, somewhat shockingly, revenue more than doubled from $7 million in 3Q17. For the full year 2016, Belviq sales totaled $39 million, down 12% YOY from $45 million in 2015. Though management commented surprisingly little on 4Q16’s large revenue growth, we suspect this sales spike is due to the performance of Belviq in South Korea, where it is partnered with Ildong Pharmaceuticals. Regardless, this is an extremely welcome boost in performance if it is sustainable. If it is a one-time “supply” boost, that’s still positive, though obviously not as big a deal. Belviq, like every other obesity drug except Novo Nordisk’s Saxenda, has struggled since launch, and experienced a particularly challenging 3Q16, when sales fell 24% YOY to $7 million. Both Arena and Eisai have shifted their focus away from obesity in light of this and presumably the entire field, and the de-emphasis was reinforced during Arena’s 2Q16 update with the company’s statement announcing a strategic shift to streamline its operating costs and allocate greater resources toward developing its non-obesity pipeline products. That said, the fact that it hired Dr. Preston Klassen recently as head of R&D (previously head of Orexigen R&D) makes us wonder if the obesity focus could return. Mr. Munshi expressed similar remarks during Arena’s recent presentation at the JP Morgan Healthcare Conference. We are disappointed though entirely surprised by this – the under-diagnosis and under-treatment of obesity, in combination with poor reimbursement for obesity pharmacotherapy, makes for an extremely challenging market. That said, many investments could show the importance of obesity as a key therapeutic area and critical area of public health on which to focus. Ultimately, it would be terrific to see some companies in combination with other public institutions willing to invest in efforts to educate providers on the safety of weight loss agents and to de-stigmatize the medical treatment of obesity. See our pooled analysis of the obesity market in 4Q16 and 2016 for more – the headline here is that the obesity market more than doubled in 2016 over 2015, on the strength of Novo Nordisk’s Saxenda.
-- by Abigail Dove, Payal Marathe, and Kelly Close