established.
· While I talk about gross sales frequently, the driver for Arena is its percentage of net sales. It is gross sales that determine things like blockbuster status, while net sales get to the meat and potatoes of what Arena garners from the sale of the drug.
· The orange line depicts my 30% adjusted IMS sales. It is currently pacing below the blue hockey stick model and above the yellow analysts' model.
· The green line depicts my 20% adjusted Symphony sales. It is currently pacing below the blue hockey stick line and above the analyst line.
· I have not stated that the company will track to any particular line.
This week the IMS scripts came in at over 4,000, a great accomplishment. This represents a week-over-week growth of an impressive 18%. As stated, I adjust the weekly number up by 30%. My adjusted IMS script number is 5,309. The chart below is a 12-week blow-up of the larger 30-week chart. As you can see, the current adjusted script pace is just above the yellow analyst line that would, in theory, generate a $12 price target. Scripts are also pacing just below the blue hockey stick model that would pace Arena to $150 million in gross sales by the end of this year. The overall trajectory of my adjusted scripts is above and ahead of the trajectory on the analysts line and leaning more toward the hockey stick that graphs a more exponential path.
(click to enlarge)
The 30-week chart below outlines the overall pace and projected paths through the end of 2013. The current pace for script sales is pointing toward $60 to $70 million in gross sales. It would now take roughly $68 million in gross sales to garner Arena the $10+ million in revenue analysts are looking for in $12 per share valuation targets. Investors need to bear in mind that Arena is paid off of net, not gross, so the $68 million would need all of the allowable discounts and costs applied to arrive at a net number, of which Arena gets 31.5%.
(click to enlarge)
Last week we witnessed IMS script numbers move up after a flat week, while Symphony was more flat. The two services nearly converged last week. We are now approaching the weeks where refills begin to take on more importance. In theory a patient that has not lost 5% by week 12 should discontinue the drug. Some patients will stop earlier for any number of reasons, and some patients may stay on longer.
As I have stated, there is an active traders dynamic to the weekly script numbers. If they are low, the stock will suffer. If they are as expected the stock will maintain. If they are high, the stock can appreciate. The trend has been a more pronounced reaction to the downside than the upside. In order to see marked upside appreciation the script numbers would need to, in my opinion, demonstrate a week over week gain of about 20% or more at this point. In contrast, a week over week gain of less than 8% would be perceived as a negative.
Summary
· Weekly IMS numbers show 18% improvement week over week
· The current adjusted pace is below the $150 hockey stick model
· The current pace is tracking well with, yet above the analyst model
· Current unadjusted IMS sales are at 29,457
· Current 30% adjusted IMS numbers are at 38,294. This is pacing just ahead of my stated goal of 40,000 in 12 weeks
· Estimated YTD gross sales (to consumers) is $7,639,673*
· Estimated YTD net sales (to consumers) is $3,829,400*
· Estimated YTD Arena share (from sales to consumers) $1,205,201*
The snafu with the SEC filings seems to have faded off with very positive script news. Stay tuned.
*Arena is not using sales to consumers to book revenue. It is using sales to the wholesaler to account for revenue. Eisai books sales to wholesalers as well. Weekly scripts are tied to actual consumer sales, thus the translation in revenue modeling.
Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
Additional disclosure: I have no position in Eisai
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