Arena Pharma Pushes Forward

As much as I think Arena Pharmaceuticals' (NASDAQ: ARNA  ) investors are overestimating the near-term potential for the biotech's obesity drug Belviq, I think it's underestimating the potential for the pipeline.

Arena's market cap is about $200 million more than its closest competition, VIVUS (NASDAQ: VVUS  ) , but Arena has four other drugs in its pipeline. VIVUS doesn't have any; it does have an erectile dysfunction drug, Stendra, but considering that it received FDA approval more than a year ago and VIVUS still hasn't launched it, the biotech doesn't seem to think it's all that valuable.

Investors' focus on Belviq is understandable:

  • Belviq is already approved. The pipeline drugs could flop in clinical trials.
  • Belviq is producing royalties and manufacturing revenue from Arena's partner, Eisai, right now. The pipeline drugs are years away from generating revenue.

But Arena's long-term valuation has to take the pipeline into account.

Fortunately, Arena is making progress, moving its pipeline closer to generating revenue for the company. On Wednesday, Arena said it completed a phase 1b trial for APD811, a treatment for pulmonary arterial hypertension, a form of high blood pressure.

The trial was only in healthy volunteers, but it seems to have met its goals for safety, tolerability, and pharmacokinetics, which measures how much of the drug is taken up by the body and how quickly it's removed.

The next step is for Arena to start a phase 2 trial in patients with pulmonary arterial hypertension. We may see two phase 2 trials, one to try and nail down the correct dose and then a second with more patients at the dose the company plans to use for phase 3 trials. Sometimes they're run as one phase 2a/b trial.

The potential market for APD811 isn't nearly as large as the obesity market. Only 0.001% of Americans have pulmonary arterial hypertension compared with 35% of Americans who are obese.

Despite the small population, it'll be a lot easier for Arena to get doctors to prescribe a pulmonary arterial hypertension drug than an obesity drug. Obesity creates long-term problems for patients, but there's generally no rush to treat patients immediately. By contrast, a little less than half of pulmonary arterial hypertension patients don't survive five years from diagnosis.

Arena should also be able to charge more for APD811 than it can for Belviq, creating a decent market despite the small number of people with pulmonary arterial hypertension. Pfizer's (NYSE: PFE  ) Revatio, for instance, brought in more than half a billion dollars last year before it went generic.

Beyond generic Revatio and a few other options, APD811's main competition will be United Therapeutics (NASDAQ: UTHR  ) Remodulin, which works through the same general mechanism acting on the prostacyclin receptor. Fortunately, APD811 is taken orally while Remodulin needs to be infused, giving it a substantial advantage if the efficacy is the same or better.

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  • Report this Comment On August 31, 2013, at 2:13 PM, marp11 wrote:

    Belviq sales for week ending 8/23 UP 18%.

    BELVIQ is a blockbuster in the making.

    DTC will not even start until DEC/JAN as per FDA RULES

    ARNA shorts are terrified.

  • Report this Comment On September 01, 2013, at 9:54 AM, Foreeverlong wrote:

    Brian,

    i have never understood why you don't see the enormous potential of Belviq as the first safe and effective weight reduction pill for the world. Perhaps, it because you have never spent the time to conduct an in-depth analysis of Belviq. Serious investors in Belviq seem to know a lot more about Belviq than you do, and it's what you do for a living. Take a quick look at www.belviqsuccessstories.com , and you will find that people taking belviq are losing weight at a rate of two to three times the rate experienced in the clinical trials, and week over week the number of prescriptions for Belviq grew by an astounding 18% with patiients reporting little to no side-effects.

  • Report this Comment On September 03, 2013, at 7:08 AM, RSRdriver wrote:

    Still pumping that Areniac built BS spewing site Belviq "success" stories.

    They are stories though aren't they!

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