Put Calls Anyone?

A diagram of the 9 levels of Dante's Hell.Image via Wikipedia Arena Pharmaceuticals is in a tough spot as the FDA rejects their weight loss drug lorcaserin, apparently one of the safer of the 3 up for approval.

Here is the link to investors. 

This decision was expected and predicted in my past articles on the Obesity Drug Market.  We all saw it coming.  I'm sorry if you didn't.  But expect loses for Orexigen, and Vivus with their upcoming FDA decisions.   I can only see gains made with shorting the stocks.  Those that had are sitting pretty right now.  It's a gamble but sometimes these gambles pay off.  I expect more loses to mount for these companies in the near future.  Arena Pharmaceuticals, Vivus Inc., and Orexigen Therapeutics.

What they chose to do next is anyones guess.  The technology could be sold off for further research.  And the company enters bankruptcy court.  Nonetheless just passing on the news.  I'm not always right but some are easier to pick than others.  Last weeks news of Amylin, Alkermes, and Eli Lilly and Company for their diabetes medicine was a heartbreaker for those who thought it would go the other way.  But there are always more to look at.  Keep looking forward and use it as a lesson.

Arena Pharmaceuticals Enters FDA Purgatory

Welcome to FDA purgatory, Arena Pharmaceuticals. It could be a long wait.

As expected, the FDA turned down Arena’s application for approval of its lorcaserin obesity drug yesterday, asking for more human and animal data.

The good news for Arena is that the FDA is not currently demanding any new human studies that aren’t already on going. It only wants full data from an almost-complete clinical trial that Arena is performing diabetic patients.

The bad news is that Arena now admits what was obvious all along–that the FDA views the effectiveness of the drug as “marginal”. (For more on this, read Matt Herper’s take on the matter, which I totally agree with.)

That means that alleviating the FDA’s concerns about brain and mammary cancer in animals becomes all-important. The agency wants a whole lot more data on this front, including independent analyses of the data. If the rat studies don’t come out clean as a whistle, or at least provide solid evidence that the rat problems won’t happen at doses that are relevant to people, the drug is dead. Mammary tumors are probably particularly worrisome for the FDA because the population of patients that will use obesity drugs is predominantly female.

On the other hand, the good news for Arena is that there is a clear road-map for approval in a year or two. Ace the diabetes trial, with at least as much effectiveness as shown in previous trials, with no hints of new safety problems. And come up totally clean on the review of the rat safety data.

If this happens, the drug gets approved. Of course, the results of the current studies could just raise more questions, demanding yet more study. This is one way for the FDA to reject a drug without giving a final no–just keep asking more questions. Look what happened to Novartis’ Galvus diabetes drug, which was supposed to be the next big thing, before it ran into safety problems in 2006. It remains in permanent purgatory.

Arena management deserves credit for specifying clearly, and in great detail, exactly what the FDA wants in its press release. Many companies don’t do this when their drug is rejected.

Don’t Buy Orexigen After Arena’s Failure

Sep. 16 2010 - 6:00 pm

This should be obvious, but based on the sudden 40% jump in share price of Orexigen, the tiny obesity drug developer, apparently not: There is no way that Orexigen is more valuable following a key vote against a drug being developed by its competitor, Arena Pharmaceuticals.

Arena’s drug, lorcaserin, always had the problem that it’s entire reason for existing was to prove a negative. Lorcaserin is meant to be more focused on the key receptor that made fenfluramine, a withdrawn diet drug, effective, but without fenfluramine’s tendency to cause heart valve problems. But the key take away from the 9-to-5 vote against lorcaserin from a panel of experts convened by the Food and Drug Administration is that the bar for obesity drugs is very high. Orexigen has a higher hurdle to jump.

And it should be. Aside from fenfluramine, many doctors remember rimonabant, from Sanofi-Aventis, which was touted as an amazing pill until psychiatric side effects, including suicidality, killed it. Abbott’s Meridia, which a panel voted to either restrict or withdraw yesterday (the vote basically left it up to the FDA) actually looks good by comparison, because at least data show for sure it causes heart attacks and patients can be warned. It still may get pulled.

Orexigen does have the advantage that its panel isn’t until December, and it has time to plan. But this doesn’t warrant much of a pop in valuation. And it doesn’t help it one whit if lorcaserin is not approved. The potential market for an obesity med is huge, but the side effects of every drug pharmaceutical companies have come up with so far have kept patients away. Competition is not a worry here.

If there’s any company here whose stock is worth buying, it’s actually likely to be Arena. This will depend, of course, on how far its shares fall, but it’s possible that lorcaserin could eventually be approved, probably with restriction including cardiac monitoring, and generate sales of several hundred million dollars. That’s not a blockbuster, but it could still be profitable. The biggest question for potential investors would be whether Arena’s management did enough to let past shareholders know about potential risks ahead of this FDA decision.

FDA Rejects Arena Pharmaceuticals’ Diet Pill

By Ed Silverman // October 23rd, 2010

Those who argued there was a ‘fat chance’ the FDA would approve the Arena diet pill were correct. The drugmaker issued a statement this morning saying the agency sent a complete response letter and the rejection can be attributed to waiting for results of a trial in patients with diabetes, concerns the Lorquess pill may cause tumors in rats and that efficacy was marginal.

The outcome is hardly surprising, given the issues raised by FDA reviewers at an advisory committee meeting (look here). The session may have prompted outrage among some investors, who generated considerable attention by circulating a petition insisting FDA staff was biased, but the agency is exercising considerable caution these days over safety issues (back story). This is especially true for diet pills after more than a decade of safety surprises, even though obesity remains a huge problem.

“With respect to the clinical reasons, the FDA stated in the CRL that the weight loss efficacy of lorcaserin in overweight and obese individuals without type 2 diabetes is marginal…,” the Arena statement says. “The FDA also stated in the letter that in the event evidence cannot be provided to alleviate concern regarding clinical relevance of the tumor findings in rats, additional clinical studies may be required to obtain a more robust assessment of lorcaserin’s benefit-risk profile.” Lorcaserin is the chemical name for the drug, by the way.

The upshot: the Arena pill is unlikely to wind up on pharmacy shelves for a year or more. And if it does, the FDA is also recommending that it be placed on Schedule IV of the Controlled Substance Act, which includes drugs that may lead to limited physical dependence or psychological dependence. Investors may have smelled a rat, but they shouldn’t have been surprised.

FDA shoots down another weight loss drug

The FDA has told the makers of the proposed weight-loss drug Lorcaserin that it will not at this time approve the marketing of the medication, citing concerns about its marginal effectiveness and about cancers that occurred at higher-than-usual rates during clinical trials.

The FDA's decision comes just two weeks after the makers of the prescription diet-pill Meridia pulled it from the U.S. and Canadian markets at the request of the FDA. It is the first signal of how the U.S. drug agency will deliberate on a trio of new weight-loss drugs proposed for the U.S. market, where about one in three adults are obese.

Arena Pharmaceuticals, the San Diego drug company that has developed Lorcaserin in partnership with Eisai Co., released the contents of an FDA letter Saturday in which the agency outlined its concerns. Among those concerns were weight-loss results that failed to rise to the FDA's standards for approval, and a worrisome increase in cancerous breast and brain tumors in rats that were given a dose of the drug that is higher than that proposed for humans. A clinical trial of Lorcaserin published in the New England Journal of Medicine found that two-thirds of patients lost at least 5% of their body weight, while a third lost at least 10% of body weight, with an average loss of 17 to 18 pounds.

With the results of a new clinical trial on Lorcaserin for obese patients with Type-2 diabetes due to be unveiled in the coming weeks, Arena Pharmaceuticals officials said they will meet with FDA officials soon to address the concerns. The company held out hope for a change of heart on the part of the FDA after those results become available.

"This is an important step for us toward the FDA's approval of Lorcaserin," said Jack Lief, Arena's president and chief executive.

The FDA's preliminary disapproval of Lorcaseri, which works on the brain to alter metabolism and appetite, comes as the agency also considers two other weight-loss drug candidates: Qnexa, a diet drug that combines an anti-seizure drug with a component of the banned diet drug Phen-Fen, and Contrave, a drug that combines the antidepressant Wellbutrin with the addiction drug naltrexone. Qnexa got a thumbs-down recommendation in June from an FDA advisory panel, and the agency is expected to issue a decision on the drug this week. Contrave is to be considered by an FDA advisory panel for the first time in December.

The FDA's approach in recent months to regulating weight-loss drugs has come in for criticism from physicians and other experts, who argue that the agency is too risk-averse in its deliberations. Responding to Saturday's report of the FDA's preliminary decision on Lorcaserin, Morgan Downey, editor and publisher of the Downey Obesity Report, said, "the action of the FDA is consistent with the pattern that no drug for obesity can be approved. They are searching for an unrealistic 'magic bullet.' ... It is about the FDA fear of some future embarrassment."

--Melissa Healy / Los Angeles Times

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