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Arena Shares Drop on European Questions

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Shares for Arena Pharmaceuticals (NASDAQ: ARNA  ) fell 8% in early trading today as investors showed concern over the latest news about obesity drug Belviq. Arena announced that it received the Day 180 List of Outstanding Issues from the European Medicines Agency's Committee for Medicinal Products for Human Use, or CHMP.

What it means
Arena's statement released today said that CHMP's "major objections relate to previously identified non-clinical and clinical issues, including tumors in rats, valvulopathy and psychiatric events." The company added that it would need to "further justify Belviq's overall benefit-risk balance taking these issues into consideration." 

Let's examine each major objection one by one. Regarding tumors in rats, earlier clinical studies did find that the occurrence of malignant tumors increased in female rats taking dosages of Belviq that equate to 87 times the daily human dose. Occurrence of tumors in male rats increased at dosages of 17 times the daily human dose. Arena's public remarks about are that the relevance of these findings to human usage of Belviq are "unknown."

Regarding valvulopathy, or heart valve disorders, Arena's clinical studies found that 2.4% of patients developed valvular regurgitation, which is the backward flow of blood across a heart valve, after one year of taking Belviq. That amount compared to 2% of patients taking placebo who developed valvular regurgitation.

As for the concern about psychiatric events, some patients taking Belviq in clinical trials experienced euphoria, hallucination, and dissociation. Adverse reactions related to psychiatric disorders that required hospitalization or withdrawing from use of Belviq occurred in 2.2% of patients, compared with 1.1% of patients on placebo.

The issues about tumors in rats and valvulopathy were raised by CHMP in its 120-day list of questions. Arena responded to those questions, but apparently its responses weren't enough to satisfy the European regulators.Now, CHMP has added another concern. 

Looking ahead
While these concerns didn't prevent Belviq from gaining approval from the Food and Drug Administration in the U.S., European approval can be a steeper hill to climb. VIVUS  (NASDAQ: VVUS  ) also gained FDA approval for its diet drug Qsymia but received a negative recommendation from CHMP. Arena knew going in that Europe could be a challenge.

Granted, all of this doesn't necessarily mean that Belviq won't gain approval in Europe. It could. However, the latest news from Arena doesn't inspire any confidence. At this point, it appears that a negative recommendation from CHMP will be more likely than not. Based on this outlook, Arena's shares probably will remain depressed for the immediate future.

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