Arena Pharmaceuticals (NASDAQ:ARNA) struggled with its obesity drug Belviq, but at a conference earlier this year, management said it planned on turning its focus to its pipeline full of GPCRs. Is there hope for this company going forward? Healthcare analysts Kristine Harjes and Max Macaluso discuss in this clip of Industry Focus: Healthcare.
A transcript follows the video.
This podcast was recorded on March 10, 2016, and released on May 18, 2016.
Kristine Harjes: Do you want to maybe pick one in particular, a company working in the space, and go a little bit deeper?
Max Macaluso: Sure. Well, I think a lot of listeners are familiar with Arena Pharmaceuticals. It's very active in this field. It has one FDA-approved drug for the treatment of obesity that's called Belviq. Kristine, I don't know if you've talked about it on the show before?
Harjes: I would be surprised if we haven't. The obesity drug makers have definitely garnered a lot of interest, particularly in the early goings of these drugs. Really, really huge promise. Obesity is something that a lot of people are struggling with, so, you look at that market, and you say, "Oh, man, if somebody could create a good drug to minimize obesity, that should be huge." But ...
Macaluso: Exactly, it should be. If you look at the performance of Arena over the last year, shares have dropped around 65%, over the last 10 years they've dropped around 90%. And a lot of that decline has been driven by the hype around obesity medications, and, unfortunately, the poor sales that have followed the launch. So, like you said, a lot of companies were competing for a piece of this market.
They all found that demand for the drug for this indication just was not as robust as they previously thought. Now, what's interesting about Arena is, even though sales of Belviq have been very slow to ramp up, at the J.P. Morgan Conference, they mentioned that they're going to try to de-emphasize its obesity drug and instead focus on its pipeline, which is full of drugs that target GPCRs. I think it's a good move. I think there's a lot of interesting drugs in development there. One targets the S1P1 receptor, GPCR, so that's in that drug class as well. This is a very competitive market. There are drugs from Celgene and Actelion that Arena would have to potentially compete with if it gets FDA approval. But it's also a big market in the autoimmune space.
Arena also has a partnership with Boehringer Ingelheim on CNS drugs that could lead to more than $240 million in milestone payments. But, you know, look at Arena's cash burn. It's around $100 million last year. It does have $150 million in cash, so there's not an immediate cash crunch coming. But, as an investor, I would say wait until you see some of the readouts from its Phase II trials. Don't focus too much on the Phase I trials in this pipeline, it's still way too early to attribute any value to those. So, you know, I would say, wait for readouts from the Phase II trials before revisiting it. And, at the same time, there are other companies that we'll talk about later in the show that have even deeper pipelines than Arena.