Ever cheer when your airplane is on time? Certainly. Ever offer to pay 6% more for your ticket because the plane was on time? I doubt it.
But that's what investors did this morning after Arena Pharmaceuticals (Nasdaq: ARNA ) announced that it had resubmitted its marketing application for its obesity drug lorcaserin to the Food and Drug Administration.
Arena has been guiding for a resubmission "around the end of the year." I'd call Jan. 3 close enough. And Arena actually made the submission last week. Presumably the company waited until yesterday to announce the submission to make sure more investors saw it. It seems to have worked.
Ironically, management should be a little offended by the increase since it basically means investors didn't have confidence that Arena could complete its obese to-do list by its self-inflicted deadline.
Handicapping lorcaserin's chances for approval on its second attempt is difficult. The FDA always does a risk-benefit analysis when deciding whether to approve a drug. The more benefit a drug provides, the more tolerable the agency is of potential side effects. Chemotherapy drugs, for instance, cause hair loss, which is an acceptable side effect for cancer, but not for something less benign like high cholesterol.
For obesity, where diet and exercise can produce meaningful weight loss, the FDA doesn't seem to think very highly of obesity drugs' benefits, which means the risks have to be fairly benign. I didn't think the potential heart risks for Abbott Labs' (NYSE: ABT ) Meridia were that bad -- and neither did half of the advisory panel of outside experts -- but that didn't stop the FDA from asking Abbott to remove the obesity drug from the market.
All the issues the FDA brought up had to do with safety. There were a couple of cancer issues, more data on potential heart valve problems, and the risk for abuse. Even after Arena did everything the FDA asked for, there's no guarantee the agency will approve the drug. Scientific experiments often breed more questions while trying to answer the initial one. And there's potential for the FDA to bring up something completely new that wasn't covered under the first review; it's happened before.
Arena will get a sneak peek at how safety-conscious the FDA is when the agency makes a decision about VIVUS' (Nasdaq: VVUS ) second attempt to get its obesity drug, Qnexa, approved. A decision is scheduled for April 17 and there will likely be an advisory panel before that. Orexigen Therapeutics (Nasdaq: OREX ) is still years away from a second decision after the FDA made it run a trial that will take almost two years to read out. Once again, safety -- potential heart problems -- is the culprit.
Arena will jump a heck of a lot more than it did this morning if the FDA approves lorcaserin, but it only seems appropriate for the most risk-tolerant investor because estimating the likelihood of that approval is nearly impossible.
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