Drugs that go on to garner the coveted blockbuster status, or $1 billion in annual sales, are often able to do so by being used for multiple indications. This can be achieved through either a formal label expansion process involving clinical trials followed by a supplemental New Drug Application filing, or simply through off-label use by physicians. For example, Questcor Pharmaceuticals' Acthar Gel could reach blockbuster status this year by growing prescriptions across a diversity of indications. GlaxoSmithKline's (NYSE:GSK) fish oil pill Lovaza, on the other hand, is believed to have achieved blockbuster status through off-label use in patients with only moderately high triglycerides.
So, it's no surprise Arena Pharmaceuticals (NASDAQ:ARNA) and its marketing partner Eisai (NASDAQOTH:ESALY) are working diligently to expand the label of their anti-obesity medication Belviq (lorcaserin). Yesterday, Arena filed an 8-K announcing that lorcaserin is now being studied in a mid-stage trial as a potential anti-smoking drug, which will last approximately 12 weeks and enroll up to 600 patients. Because Arena's shares moved higher on this news, I think it's worthwhile to take a deeper look at the potential commercial impact of a label expansion for lorcaserin as an anti-smoking drug.
Smoking cessation as a commercial opportunity
The smoking cessation market, in the broad sense, is expected to grow to $1.2 billion by 2017 in the U.S. alone. However, this estimate includes smoking cessation aids such as nicotine patches, gums, and sprays. In terms of pharmaceuticals, the U.S. Food and Drug Administration, or FDA, has approved two drugs for smoking cessation, namely Pfizer's Chantix and GlaxoSmithKline's Zyban, aka Wellbutrin.
Chantix has seen sales top $700 million in the past, but the drug is now mired in controversy over potential suicides and cardiovascular risks. In fact, Pfizer had to dole out $273 million last year because of lawsuits stemming from suicides and other psychiatric problems.
Zyban's sales for smoking cessation are not easy to decipher because the drug is prescribed for a host of other indications. Moreover, the drug has also seen its fair share of controversy due to marketing practices, further clouding its true market potential as a pharmacotherapy for smoking cessation.
In sum, the market size for smoking cessation drugs is likely to be in the hundreds of millions, but it's difficult to put even a rough estimate on lorcaserin's market potential for this indication due to the aforementioned issues. Moreover, the biggest market opportunity according to Arena and Eisai lies in ex-U.S. markets, especially in Asia. Beyond estimating the number of smokers in ex-U.S. territories, however, we lack a decent comparable to estimate market size in a quantitative sense. In fact, Arena and Eisai have even refrained from placing a market value on this indication for lorcaserin. Even so, the fact that neither smoking cessation drug currently on the market appears to be effective over the long term shows there is a need for new pharmaceutical options.
Could lorcaserin be the next anti-smoking drug?
Loracersin is a selective 5-HT2C agonist that targets a biochemical pathway known as the dopamine reward system. Simply put, lorcaserin is supposed to reduce cravings for food and drugs like nicotine. Preclinical studies on rats showed that lorcaserin significantly reduced the self-administration of nicotine, even in groups receiving relatively low doses of the drug. The current mid-stage study will evaluate if lorcaserin can effectively help patients refrain from smoking in the last four weeks of treatment, also known as the continuous quit rate. Given the large size and design of the trial, we should thus have a good feel for lorcaserin's effectiveness as a pharmacotherapy for smoking cessation before the year's end.
Because lorcaserin's primary indication as a treatment for chronic obesity has yet to pay off commercially, Arena and Eisai will need to explore alternative avenues to unlock the drug's value. An approval for smoking cessation would likely add hundreds of millions to the drug's annual sales, possibly outpacing its revenue stream for chronic obesity, if commercialization went well. And what's key to keep in mind is that the current host of smoking cessation drugs aren't particularly effective, and in the case of Chantix, serious side effects have curtailed the drug's use. As such, you should keep a close eye on lorcaserin's ongoing trial for smoking cessation as it unfolds in the coming months. If the clinical trials prove fruitful, my view is that this supplemental indication could be a major boost to the drug's commercial performance.
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