Prospects for Arena's (ARNA) Belviq Are WAY Overblown - Cramer
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Arena Pharmaceuticals (Nasdaq: ARNA) is trading lower Wednesday, as one notable name is getting a bearish on the prospects for its Belviq obesity drug.
According to stock swami Jim Cramer, Arena's future might be dimmer than the market is giving it credit for. Cramer noted the massive run higher this year, but he looks for small, undiscovered names in biotech, the opposite of Arena upon FDA approval of Belviq (lorcaserin).
Cramer noted that, although markets are expecting $1 billion to $3 billion of annual sales for Belviq, actual numbers might drastically miss views. Though he concedes that the drug does aid in weight loss, Cramer points out that the drug produces an average drop of only 5 percent to 6 percent in patients over 12 weeks.
Should the drug not produce results in 12 weeks, patients are instructed to discontinue use. In addition, no higher dosages may be prescribed, there's still the question of whether HMOs will cover Belviq, and competitor VIVUS (Nasdaq: VVUS) is going in front of the FDA with its Qnexa obesity drug next week.
Arena is only expected to get 40 percent of revs, with the rest going to partner Eisai.
So, though the market is pricing in a $6 billion opportunity for the drug, Cramer thinks that number is way overblown. For an up-and-coming biotech name, Cramer recommends generic drug giant Onyx Pharmaceuticals (Nasdaq: ONXX), who has a blood cancer drug awaiting approval.
Shares of Arena are down 5 percent early. In addition to the Cramer comments, competitor Orexigen's (Nasdaq: OREX) Contrave study is coming along faster than expected.
According to stock swami Jim Cramer, Arena's future might be dimmer than the market is giving it credit for. Cramer noted the massive run higher this year, but he looks for small, undiscovered names in biotech, the opposite of Arena upon FDA approval of Belviq (lorcaserin).
Cramer noted that, although markets are expecting $1 billion to $3 billion of annual sales for Belviq, actual numbers might drastically miss views. Though he concedes that the drug does aid in weight loss, Cramer points out that the drug produces an average drop of only 5 percent to 6 percent in patients over 12 weeks.
Should the drug not produce results in 12 weeks, patients are instructed to discontinue use. In addition, no higher dosages may be prescribed, there's still the question of whether HMOs will cover Belviq, and competitor VIVUS (Nasdaq: VVUS) is going in front of the FDA with its Qnexa obesity drug next week.
Arena is only expected to get 40 percent of revs, with the rest going to partner Eisai.
So, though the market is pricing in a $6 billion opportunity for the drug, Cramer thinks that number is way overblown. For an up-and-coming biotech name, Cramer recommends generic drug giant Onyx Pharmaceuticals (Nasdaq: ONXX), who has a blood cancer drug awaiting approval.
Shares of Arena are down 5 percent early. In addition to the Cramer comments, competitor Orexigen's (Nasdaq: OREX) Contrave study is coming along faster than expected.
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