Handicapping Arena Pharmaceuticals' new weight-loss pill is a spectator sport. Since the small drugmaker ($ARNA) won approval for its Belviq drug, analysts in the U.S. have been weighing in about the drug's prospects. Now, analysts in Japan have added their two cents--and they're none too hopeful that Belviq will deliver the goods for Arena's Japanese marketing partner Eisai.
As The Street reports, Japanese analysts are dissecting Belviq's ability to pump up Eisai's sales and earnings. While their assessment of Belviq's blockbuster potential varies wildly, they all appear to agree that it's no major fuel injector for Eisai.
J.P. Morgan analyst Masayuki Onozuka is on record with a lowball sales forecast: $100 million for 2014 and $200 million for 2016. Morgan Stanley MUFG's Mayo Mita is a bit more positive, estimating peak sales of $200 million to $500 million. In any event, says Credit Suisse's Fumiyoshi Sakal, we "expect [Belviq] to be only a modest positive for [Eisai] shares. We also see little possibility of [Belviq] quickly developing into a blockbuster."
The most optimistic sales forecasts come from Goldman Sachs' Steve Chesney, The Street notes; Chesney forecasts $1.1 billion in Belviq sales for fiscal 2017. But under the terms of Eisai's deal with Arena, margins on the drug are expected to average 39%, "well below" Eisai's 73% margin for fiscal 2012. Barclays analyst Atsushi Seki concurs: "This is not a high-margin drug for Eisai; we think gross margin could range from 30-50%."
Eisai's arrangement with Arena comes with big costs. Milestone payments, for one. For another, the company is expected to cover a big share of the cost of testing Belviq's long-term safety. But even Chesney expresses reservations about Belviq's effectiveness and its effects on sales; "we believe lack of efficacy will significantly limit uptake," he said. And that's a drawback that applies in the U.S., too.
- read The Street's take