Wall Street fat cats aren’t interested in losing weight. And while many Wall Streeters make a living screwing the public, they spurn methods to improve sex lives. Such disdain hurts certain San Diego biotech stocks.
Overall, biotechnology shares soared 32 percent in 2014, but stocks of two well-publicized San Diego biotechs specializing in weight-loss treatments were a mixed bag. Stocks of two local biotechs hawking products to enhance sex lives got a frigid blast from investors, exacerbated by a highly volatile stock market.
As of December 24, the stock of Arena Pharmaceuticals, which has a treatment for obesity, closed at $3.57, after starting the year at $5.87. Orexigen Therapeutics, which has a tablet for obesity, has come to Wall Street’s positive attention. The stock closed December 24 at $5.98, after starting the year at $5.79.
Stocks of San Diego biotechs with products for sex life enhancement did very poorly. Apricus Biosciences, which has products for female sexual arousal as well as male erectile dysfunction closed December 24 at $1.01 after beginning it at $2.59. Innovus Pharmaceuticals, also a maker of sex products for men and women, finished at 19 cents after starting the year at 39 cents.
Orexigen stock closed at $3.85 on November 7. The next trading day, November 10, it was at $5.13 — a one-day upswoosh of 33 percent. The following day, November 11, the company reported that its third quarter was a winner. Wall Street had expected a loss of 13 cents a share. Orexigen reported a profit of 9 cents a share. Wall Street had expected revenue of $9 million. Orexigen reported $30.9 million. “The rally…doesn’t seem to be coming to an end soon,” enthused Ritesh Anan of benzinga.com.
Analysts rushed to raise their forecasts of Orexigen’s future sales and earnings. Bank of America/Merrill Lynch boosted its target price on the stock to $9, saying that the company could be a leader in the fight against what the firm calls “Globesity.” Sarbjit Nahal of Merrill noted, “Globally, 2.1 billion people are overweight and 671 million are obese.” That’s a big market to put your arms around.
Chris Lange of 247wallst.com said that Merrill Lynch’s $9 price target was “well below the consensus analyst price target of $11.33.” The Orexigen rally lost steam, then picked up again in December after yahoo.com reported that the company’s weight-loss pill, Contrave, had captured 28 percent of prescriptions after only eight weeks on sales shelves. Orexigen has taken sales from its local neighbor Arena, whose market share dropped from 60 to 44 percent and whose stock reflected the decline, according to professional money manager @zbiotech.
Standard & Poor’s uses the term “investability quotient” to describe a company’s medium- to long-term potential. Orexigen scored lower than 92 percent of the companies S&P follows — in short, extremely low. However, the rating service does say the trend of the stock is very bullish, with considerable volatility.
Arena Pharmaceuticals has had problems. It got Food and Drug Administration approval for its weight-loss drug, Belviq, in 2012 and began selling it in mid-2013. Revenue has been on the slim side, although in this year’s third quarter, product sales hit $16.8 million; total prescriptions were up 30 percent from the previous quarter. However, the company lost 13 cents a share, wider than the loss of 10 cents in the quarter a year earlier. The stock dropped 3.2 percent on the news. “Although Arena Pharma’s overall results were disappointing, we are encouraged by Belviq sales” in the third quarter, said an analyst for Zacks Equity Research.
Steve Byrne of Merrill Lynch raised his estimate of Belviq sales for 2014 to $56 million from $49 million. He noted that Arena is also working on a quit-smoking drug, but it’s too early to assess the outcome. However, Byrne thinks Arena stock will underperform the market because of “modest market potential” of Belviq. Basically, the drug provides “marginal weight loss” potential, he said.
Belviq has not been approved for sales outside the United States. Regulators are concerned about the product’s cardiac effects. Employees and directors have been sued for making misleading statements about Belviq’s possibilities. The company can’t predict the outcomes of the suits.
Standard & Poor’s says Arena’s investability quotient is lower than 93 percent of companies the firm follows — that is, very low.
Apricus Biosciences sells a topical product, named Vitaros, for male erectile dysfunction and peddles it in Canada, the United Kingdom, Sweden, Germany, and Belgium. The company thinks that applying Vitaros to the penis is more satisfying than taking a pill. However, for the quarter ended September 30, it had less than $1 million in actual product sales. Its loss for that quarter was $3.1 million, slightly worse than the $3 million it lost in the same quarter a year earlier. It has developed a room temperature version of Vitaros.
Apricus is also trying to develop a topical cream named Femprox for female sexual interest/arousal disorder, an affliction that some scholars think is a fiction — merely a marketing gimmick. The company is also working on various urology and rheumatology products. Standard & Poor’s says Apricus’s investability quotient is lower than 95 percent of companies it follows. That’s low.
Innovus Pharmaceuticals has five nonprescription products: Zestra, to increase sexual desire in women; EjectDelay, for male premature ejaculation; Sensum, to increase the sensitivity of the penis; Vesele, to boost blood flow; and Zestra Glide, a lubricant. For its quarter ended September 30, it lost $1.1 million, up from a loss of $734,000 a year earlier. Revenue was only $443,087 for the quarter, up from a minuscule $166 a year earlier. Actual product sales were only $118,087 in the quarter.
In late November, Innovus put out a news release saying that 246 women in the United Kingdom had tested Zestra over a two-week period. Fully 77 percent of the women reported a more intense sensation and arousal in sex, 66 percent reported an ease in orgasm, and more than half reported a more intense orgasm.
Standard & Poor’s has no report on Innovus.