JPMorgan Healthcare Conference Highlights: Arena Pharmaceuticals, Inc.

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On Monday we kicked off the start of the 2014 JPMorgan Healthcare Conference, which is arguably the most important health care conference of the year, bringing together pharmaceutical, biotechnology, and medical device makers all under one roof.

Just like the recently concluded Consumer Electronics Show in Las Vegas, this annual event gives health care companies a chance to demonstrate to investors and Wall Street where they've been and where they're headed. Because earnings guidance can be somewhat irrelevant for clinical-stage biotech and medical device companies, consider this event your chance to gain guidance from some 300 top health care companies.

Today, we're going to take a closer look at Arena Pharmaceuticals' (NASDAQ: ARNA  ) presentation, which was given by CEO Jack Lief.

Arena Pharmaceuticals' past year
Generally speaking, 2013 was a transformative, but frustrating, year for Arena shareholders. The Food and Drug Administration in 2012 approved its weight control management treatment Belviq, but it took significantly longer than expected for the product to get scheduled by the Drug Enforcement Administration. As a result, the treatment only hit pharmacy shelves this past June.

Similar to VIVUS' (NASDAQ: VVUS  ) Qsymia, Belviq sales have been less than stellar in the early going. Putting aside milestone and collaborative revenue, Belviq delivered just $5.4 million in total product sales in the U.S. in the third quarter, of which Arena is entitled to 31.5%, or $1.7 million, with the remaining going to licensing partner Eisai (NASDAQOTH: ESALY  ) . Initial problems that have plagued sales for both Belviq and Qsymia include poor physician awareness and limited insurance coverage.

What Arena Pharmaceuticals had to say
While many pharmaceutical heavy-hitters gloss over numerous ideas during their presentations, Lief hammered home three points in his JPMorgan Healthcare Conference address: maximizing the value of Belviq, pursuing additional indications for lorcaserin (that's the scientific name for Belviq), and advancing its other pipeline drugs beyond weight management.

Clearly, Arena's biggest and most immediate opportunity lies with Belviq. Lief noted that Belviq is awaiting regulatory approval in Canada, Mexico, Switzerland, and South Korea, and that the company anticipates filing for approval in Brazil and Taiwan shortly. Perhaps most intriguing with regard to the strategy from Arena and marketing partner Eisai is the announcement Monday that Eisai had doubled its sales staff to 400 people in an effort to improve physician awareness of the product. If you recall, VIVUS' Qsymia offered greater weight reduction in trials, but Belviq had the more favorable safety profile, making it a strong choice to be prescribed by physicians.

Prescriptions have generally trended higher with Belviq, as you can see below, but the uptrend has been somewhat hard to predict and appears to be wholly dependent on consumers' insurance coverage.

Source: Arena Pharmaceuticals, IMS NPA.

Lief also highlighted four possible additional lorcaserin indications made possible by Arena's partnership expansion with Eisai in November, which resulted in a $60 million upfront cash payment. The indications Arena intends to explore are: lorcaserin as a treatment for smoking cessation; lorcaserin co-administered with phentermine for weight control management; an extended-release formulation of lorcaserin; and the initiation of a lorcaserin cardiovascular outcomes trial known as Camellia.

While pre-clinical evidence of higher doses of lorcaserin leading to reduced nicotine addiction is encouraging, and I'd have to say an extended-release formula would certainly improve patient convenience, the roughly five-year Camellia trial -- an FDA post-marketing requirement -- is what investors really care about. A primary concern about weight-control drugs has been their long-term effect on cardiovascular function. Beginning this month, Arena plans to enroll about 12,000 patients in this study.

Finally, Lief focused on what everyone else usually forgets -- that Arena has a completely separate pipeline of experimental drugs outside of lorcaserin/Belviq. Lief covered four compounds: APD811 for pulmonary arterial hypertension, or PAH, temanogrel for thrombotic diseases, APD334 for autoimmune diseases, and APD371 as a pain management drug.

We didn't hear a lot of new data here necessarily, but now have a better timeline as to when these pipeline products are expected to advance, with an APD811 trial for PAH due to start in the first half of 2014, a phase 2a trial for temaogrel expected in the second half of 2014, multiple-ascending dose trials expected for APD334 throughout 2014, and a phase 1 of APD371 already under way.

Source: Arena Pharmaceuticals. 

Making sense of it all
With groundbreaking new drugs sometimes you have to take the good with the bad. In the case of Arena, investors certainly get a hearty dosing of both.

On the positive side, I was glad to see that Eisai remains committed to helping advance Belviq in the U.S., and that there's a good chance Belviq will be approved in multiple additional nations before the year is up. Arena's lorcaserin and non-lorcaserin pipelines also show promise, but none of these studies have reached a point where I'm sold on their effectiveness as of yet.

Then again, I'm a bit disturbed that the best Arena and Eisai can come up with to boost Belviq sales is "throw more sales representatives at doctors and that'll do the trick!" This just feels like the wrong approach, when Arena and Eisai should be beating down insurers' doors to get them to cover this potentially breakthrough therapy. Consumers have proven they won't pay for Qsymia or Belviq using out-of-pocket money, so sales really can't be expected to take off until more insurers latch onto the treatment.

Another primary concern for Arena investors has to be the length of the Camellia study. Shareholders knew from the start that this gigantic study wasn't going to be completed overnight, but five years is more than enough time for a company like Orexigen Therapeutics (NASDAQ: OREX  ) , which is developing Contrave in partnership with Takeda Pharmaceuticals (NASDAQOTH: TKPYY  ) , to leave Qsymia and Belviq in the dust. Orexigen has already completed a cardiovascular safety trial involving some 9,800 patients known, with the results demonstrating no increase in adverse events. This could be the difference that clears the way for Contrave to be approved in Europe, a stomping ground that Qsymia and Belviq have found elusive, and it could be a reason for Contrave to be approved in favor of either Qsymia or Belviq in the U.S.

This will definitely be an important year for the development of Belviq, and I believe by the late second half of 2014 we'll have a good idea of whether it was just slow out of the gate or one of the biggest busts of all time.

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Read/Post Comments (5) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 16, 2014, at 1:12 PM, Yale1066 wrote:

    Mr. Williams, Why did you dismiss the significant milestone payments to Arena from Easai ? One would think that one quarter of a BILLION in cash on hand should not be dismissed, and with a very clean balance sheet. Did not Jack Lief and the North American CEO of Easai say on Bloomberg TV that they are way ahead of projected insurance coverage of 50 % by March 2014 ? In my opinion those points should have been addressed in your article. Articles like these are now having no effect on the pps. Take your short losses and go long.

  • Report this Comment On January 17, 2014, at 12:31 PM, bmc007 wrote:

    Thanks Yale for saving me the bother of having to respond to him.

  • Report this Comment On January 17, 2014, at 12:32 PM, marp11 wrote:


  • Report this Comment On January 17, 2014, at 12:34 PM, TheGazoo wrote:

    I agree with Yale1066...

    Also...... What's with the OREX leaving ARNA in the dust comment?

    It's just another rehashed combo of drugs with.....

    HORRIBLE SIDE EFFECTS......That's common knowledge!

    NEW & NOVEL DRUGS.... are the future

    Everyone understands this.....

    Hence BELVIQ...... Will come out he leader on top.

  • Report this Comment On January 17, 2014, at 1:47 PM, keahou wrote:

    As usual, pundits compare efficacy of Belviq and Qsymia with a false premise. The higher dose of Qsymia is always used for the comparison. However only a small fraction of patients take the higher dose of Qsymia. The "Standard" dose has similar efficacy as Belviq. Why is it that this critical point is ignored by all pundits? Over promotion by the PR staff at VVUS? It is time to wake up and present the true efficacy of the 2 doses of Qsymia vs Belviq.

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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