Boston, MA 05/22/2014 (wallstreetpr) – As the speculations about takeover of Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) by Eisai grow stronger, there are some to establish that Eisai will not take such a drastic step, atleast in their senses.
Spiking the rumor is a recent report from FT Alphavile editor Paul Murphy, who claimed that the takeover talks between Arena and Eisai are on a serious track. Murphy states that since Eisai already pays a higer royalty to Arena for Belviq, therefore, it makes sense for it to go ahead and buy the company. Murphy roughly assesses the deal could be higher than $6.51 per share.
Monumentally Stupid
But, rejecting Murphy’s thoughts, Adam Feuerstein at ‘The Street’ states that if Eisai really goes for the deal then it will be “monumentally stupid” as well as “financially reckless” for Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). Eisai is a Japan based pharmaceutical company that already owns two-thirds of Arena’s primary asset that is its weight-loss drug, Belviq. Feuerstein adds that Arena’s current enterprise value of $1.2 billion, and he says that it does not make sense if Eisai acquires the remaining stake of a third of Belviq by paying $1.6 billion, a 30% premium. As of now, Eisai’s ownership of Belviq is far from profitable since the drug made an awful debut. Over the last one year, Belviq generated total sales of worth just $25 million, for which Eisai has paid just a little over $8 million to Arena as royalities. Therefore, in this scenario, it is totally unlikely that Eisai would pay $1.6 billion for a drug that is actually not working in the markets.
Will Loose Than Buy
Feuerstein notes that Eisai’s presence stake in Belviq is returning it losses than anything else. Eisai’s efforts to steer the sales of Belviq through tripling its sales employees to 600 and expensive TV ads have so far been turned out to be futile. While Belviq has not much competitive threat from present wight-loss pills like that from Vivus (VVUS), but soon new entrants in the line from Takeda and Orexigen Therapeutics will add to competition. All those facts support that Eisai will not look at buying Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)rather it might get rid of Belviq and Arena in the near term.
