Arena (ARNA) Q1 Earnings: What's In Store For The Stock?
Zacks Investment Research | May 04, 2016 08:07AM ET
Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) will be reporting first quarter 2016 results on May 9 after the market closes. Arena had delivered a positive earnings surprise in the last quarter. Let’s see how things are shaping up for this announcement.
Factors at Play
Arena’s only approved product is obesity treatment, Belviq, whose performance remains lackluster. Driving sales in the U.S. anti-obesity market remains challenging due to a variety of factors including the tendency of healthcare providers to treat symptoms of obesity rather than the disease itself, a narrow focus on certain patient types for treatment and historically low third-party insurance coverage.
VIVUS, Inc. (NASDAQ:VVUS) , one of the key players in the obesity market, noted in its first quarter earnings report that first quarter 2016 was unusual for the anti-obesity market as it failed to bounce back after the holiday season.
Belviq is expected to continue to grow slowly until results from the cardiovascular outcome trial (CVOT) are out and included in the product label, if positive. Results from the CVOT study are not expected until 2018. Arena is also looking to get a once-daily formulation of Belviq (Belviq XR) approved.
Meanwhile, Arena is focusing on its pre-clinical and clinical pipeline. The company is opportunistically pursuing specific strategic collaborations for these programs and is working on the discovery and development of additional pre-clinical drug candidates.
Arena is also working on cutting its burn rate through reduced staffing and cost reduction programs. Arena implemented a restructuring plan to improve efficiencies and cut costs through a 35% (approximately 80 employees) reduction of its U.S. workforce. The company also plans to cut its Swiss workforce by the end of the second quarter of 2016.
Surprise History
Arena’s performance has been strong over the last four quarters with the company surpassing earnings expectations in each of the last four quarters with an average earnings surprise of +20.95%.
Earnings Whispers?
Our proven model does not conclusively show that Arena is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.
Zacks ESP: The Zacks Investment Research
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