Up, Down, Up. Is This Stock a Home Run or Not?

Shares of Arena Pharmaceuticals (Nasdaq: ARNA  ) have been on a roller coaster over the past 24 hours. It rose by 38% after hours on word that the company would release data for its obesity drug, lorcaserin, today. Then it opened down 10% after the data was released only to rebound and climb by 20% after management had its say.

That's the craziness of biotech for you.

I'm really not sure what management said that got investors so excited; the data is lackluster at best. Lorcaserin might be strong enough to get approved, but it still pales in comparison to efficacy data released by VIVUS (Nasdaq: VVUS  ) and Orexigen Therapeutics (Nasdaq: OREX  ) .

For instance, VIVUS' Qnexa resulted in weight loss of 11.0% and 10.4%, beating placebo by about 9 percentage points in two recently completed trials. Lorcaserin, on the other hand, resulted in a 5.9% reduction in body weight, a mere 3 or 4 percentage points better than placebo, depending on which patient group you look at. Comparing data across trials can be deceptive at best, but in this case I think we can call a qualitative winner.

Sure, the drug is safe. It doesn't seem to have the heart problems that plagued Wyeth's (NYSE: WYE  ) fen-phen or the psychiatric problems that plagued drugs from sanofi-aventis (NYSE: SNY  ) , Pfizer (NYSE: PFE  ) , and Merck (NYSE: MRK  ) . And management wants to argue that it'll be a first-line treatment for that reason alone.

But I have a hard time seeing doctors rushing to get their patients on lorcaserin when there may be other drugs on the market by then that help people shed so many more pounds. If doctors are looking for a low-risk solution, they might be better off prescribing diet and exercise changes than trying to eke out an additional 6- to 8-pound loss for a 200-pound person on lorcaserin.

There may be some smaller role for lorcaserin on the obesity market, just as there has been for other less-than-stellar diet drugs before it, but if you're looking for a blockbuster homerun, I'm not sure you'll find it in this Arena.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is a recommendation of the Inside Value newsletter service. The Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (8)

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  • Report this Comment On September 18, 2009, at 5:20 PM, dutchburger wrote:

    Brian,

    I think you leave several points on the table that do count in favor of a home run. A subset of 25% of all patients in the Arena trials lost an average 35lbs. Due to the safety of Arena's drug, it might indeed be the one that doctors would prescribe first, and with say 50% success rate (the 2 best sub-sets), Arena could obtain significant market share of a huge >>10bln a year market.

    Several other arguments in favor of home run status are:

    - safety - outstanding with Arena's drug, not-so-sure-yet with the competitors

    - first mover advantage; FDA approval expected end of 2010

    - not-so-comparable Phase III trials, in favor of Arena, who tested the drug in some 7000 (!) patients over a 2 year timeframe. Compare that with the several hundred of e.g. VVUS, which may result in the FDA asking for more data.

    ARNA will at least double in the next 12-months, in my view, with some significant upside potential beyond. The market is big enough for three suppliers and Arena will take a nice chunk of it.

  • Report this Comment On September 18, 2009, at 6:01 PM, SlimLimb wrote:

    "If doctors are looking for a low-risk solution, they might be better off prescribing diet and exercise changes than trying to eke out an additional 6- to 8-pound loss for a 200-pound person on lorcaserin."

    From the press release:

    Patients treated with 10 mg of lorcaserin dosed twice daily (BID) who completed the 52-week trial according to protocol demonstrated the benefit of long-term treatment with lorcaserin:

    * 63.2% of patients lost at least 5% of their body weight

    * 35.1% of patients lost at least 10% of their body weight

    * Patients lost an average of 17.0 pounds, or 7.9% of their body weight

    If a doctor can prescribe a SAFE drug that has a 35% chance of helping a patient lose a MINIMUM of 10% of their body weight, they will do it without a hesitation. Period.

    In addition, Treatment with lorcaserin over one year was associated with significant improvements or strongly favorable trends compared to placebo in multiple secondary endpoints, including blood pressure and lipids.

  • Report this Comment On September 18, 2009, at 6:15 PM, dawnamo wrote:

    VIVUS may be hot right now but as a doctor that uses these drugs for weight loss I can tell you people are just going to use the two cheap generics ($60/month together cash) rather than a new expensive combo pill that is already being used in weight loss clinic. Weight loss is often not covered by insurance so patient pay cash. As a doctor you look for solutions that reduce cost in these circumstances.

    Big surprise. Phentermine causes weight loss. Topamax causes weight loss. Wow. When we put them together they cause weight loss. Really!!?? What's the excitement for. Combo pills are a scam and usually do poorly when the generics are available.

    Also, what VIVUS doesn't want you to know is that Topamax makes you seriously stupid, literally 5-10 IQ points lost, and causes peripheral neuropathy that is often dose limiting. Arena's drug may actually make you smarter based on receptor effects. 5.9% vs 11% starts to look pretty good if it means you can remember your own zip code.

    The market doesn't necessarily get it but on simple facts VIVUS is a bad bet in my opinion.

  • Report this Comment On September 18, 2009, at 8:35 PM, tas2124 wrote:

    What is not yet widely understood about ARNA is that they did not include excercise and diet management instructions with the trial. VVUS did. So of course if you give Locasern with excercise and diet, the numbers go up, You are right comparing across trials is difficult at best and when they are not apples to apples, as in this case, the truth is hidden. The FDA will not have facts hidden.

  • Report this Comment On September 18, 2009, at 9:52 PM, jsbalaban wrote:

    Brian's article fails to address so many points, I'm not sure I know where to start!

    Firstly, the upper quartile of the BLOSSOM study lost 16.3% of their body weight, an amount of weight just shy of Qnexa's drug. Many drugs have a profile where they benefit a specific subset of patients more than others, and Lorcaserin is one of them. So in that regard, Lorcaserin will have very significant benefits for that group and of course less for others. Secondly, Lorcaserin can be prescribed long term- anything with phentermine in it, simply cannot. Lorcaserin also has great co-morbid benefits that Qnexa's drug doesn't- decrease in blood pressure, increase in HDL cholesterol, decrease in lipids and enhanced glucose uptake profile. Lorcaserin is also a single agent, minimizing interaction potential with other drugs these patients might be on. And lastly, Lorcaserin will definately be the only drug to be prescribed to a large portion of the population who simply cannot take drugs like phertermine- hypertensives, those predisposed to CVA's, those with just about any sort of underlying coronary pathology, etc. So Lorcaserin definately has a huge market and will satisfy a very large unmet need in those currently untreated because of their own unrelated health issues.

    James Balaban, M.D.

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