Rude Shock for Arena Pharma - Analyst Blog

The US Food and Drug Administration (FDA) dealt a major blow to Arena Pharmaceuticals (ARNA) by refusing to approve the company's obesity candidate lorcaserin citing tumor-related safety concerns. The US regulatory authority issued a complete response letter (CRL) stating that the efficacy of the drug in non type II diabetes obese patients was found to be marginal.

The FDA asked the company to submit the final study report of the BLOOM-DM (Behavioral modification and Lorcaserin for Overweight and Obesity Management in DiabetesMellitus) study which evaluated the efficacy of lorcaserin against placebo in obese and overweight patients suffering from type II diabetes. Arena intends to present top-line data from the study shortly and complete the study report by the end of this year.

The FDA stated further that it may ask Arena to conduct additional studies on the candidate in the event of Arena failing to provide further evidence to mitigate the concerns about tumors. The additional studies would enable the regulatory body understand the risk/reward profile of the drug better. The company intends to meet the FDA regarding the issue.

The FDA's decision does not surprise us. Last month, an advisory panel of the FDA voted 9-5 against approving the obesity drug voicing similar safety concerns as raised by the agency itself while refusing to approve the candidate. The panel expressed concerns about tumors found in rats in pre-clinical studies of lorcaserin.

We remind investors that Arena submitted the New Drug Application (NDA) for lorcaserin, internally discovered and developed by Arena, to the FDA late last year. The submission was based on a package including data from 18 studies that evaluated 8,576 patients. Lorcaserinaims to treat overweight patients suffering from at least one weight-related co-morbid condition.

The refusal of the FDA to approve lorcaserin is a major blow to Arena who was looking to enter the lucrative obesity market through the approval. The FDA is scheduled to decide on another obesity drug, Vivus Inc.'s (VVUS) Qnexa shortly. However, the Vivus candidate is likely to face the same fate as lorcaserin since an advisory panel of the FDA recommended against approving the drug in July 2010 citing safety concerns.

Apart from Arena and Vivus, Orexigen Therapeutics Inc. (OREX) is also developing an anti-obesity drug, Contrave, which is scheduled to face an FDA advisory panel on Dec. 7, 2010. All 3 obesity candidates work on the patient's central nervous system, thereby dampening the appetite.

Currently we have a Neutral stance on Arena which is supported by a Zacks#3 Rank (short-term Hold recommendation) on the stock.