Beginning with my initial multifactor analysis of Arena's (ARNA) Belviq and Vivus' (VVUS) Qsymia, I have argued that investors and analysts were foolish to focus on average weight loss when comparing Belviq with other weight loss drugs for two reasons. First, there are different causes for weight loss and Belviq works best with people whose obesity is related to feelings of hunger (between meal cravings and difficulty of being satiated during meals). Those who gain weight for different reasons will not experience weight loss to the same extent. Furthermore, the several pathways that metabolize Belviq are genetically controlled. These factors result in variation in Belviq's efficacy with some being "responders" and the unlucky being "non-responders."
At the American Diabetes Association meeting in Chicago on Saturday, researchers found that early identification of responders (weight loss of 5% or more) was a predictor of "robust" one-year results for weight loss, improving cardiovascular vital signs, and for diabetics, the reduction of blood glucose. Comparing these results with the "average" used by the FDA, reporters and analysts, suggests we are looking at two different drugs. Of the responders without diabetes, 86% lost more than 5% of their weight and 50% lost more than 10% (Figure 1). Seventy-one percent of the responders with type 2 diabetes lost more than 5% of their weight and 36% lost more than 10% (Figure 2). The figures show how this new analysis compares with Qsymia. However, we must remember that these drugs were never tested against each other and different experimental protocols will alter actual results, including the placebo adjustments.
Figure 1. Percent of patients losing more than 5% of their weight after 52 weeks for Belviq and 56 weeks for Qsymia. Results for Belviq in Figures 1-2 are from a poster presentation at the American Diabetes Association. The Results for Qsymia in this figure and Figure 2 are from CONQUER (mid and high dosages) and EQUIP (low dose) studies.
Figure 2. Percent of patients losing more than 10% of their weight after 52 weeks for Belviq and 56 weeks for Qsymia.
The new analysis shows that Belviq responders with type 2 diabetes enjoyed additional benefits. Their HbA1c levels decreased 1.2 and fasting blood glucose dropped by 29.3mg/dL. Previously, the beneficial effect of Belviq on HbA1c was conservatively estimated as 0.9%. HbA1c levels have a linear relationship with blood glucose and a reduction of HbA1c by about 1 percentage point can decrease the risk of diabetes-related long-term complications by 21%.
KLLJ Investments and I found Belviq was much better than the averages that most focused on. Teasing apart the data to determine the full extent was difficult. Readers attacked me and called me a pumper for arguing Belviq's efficacy was greater than 5%. I argued that 22% of the Belviq responders experienced 10% weight loss. In my analyses, I try to be conservative and I argued that I was being conservative in estimating sales of Belviq and in comparing anti-obesity drugs. The new data shows I was overly conservative by 38% to 55% for diabetics and non-diabetics respectively.
Explaining all this data to the average investor and institutional investor is difficult since they are used to drugs working or not working and knowing 9.8% average weight loss is better than 8%. An argument that Belviq should be judged on its ability to help half the obese population does not excite investors even though obesity rates have reached obese proportions and helping half could be extremely profitable. Reporters like Ginger Skinner of Consumer Reports, may have stumbled into the debate without examining the data in detail, may have looked at the research abstracts, quoted the average weight loss in support of what she wrongly thought was slam-dunk obvious - Belviq did not appear to be worth the paper the scripts are written on. I thought that the myth of averages was disappearing from the debate, but it will continue to rear its ugly head as long as most readers finish only 50% of an article, sound bites are believed, and sales prove one side wrong.
Do not expect Arena's shares or its marketer Eisai (OTC:ESALY) to rise in proportion to these results. We are at a phase when prescriptions matter most. Investors should weigh this new data when considering a long-term investment in the anti-obesity drug sector and on Arena in particular. Recent good news, such as 1,087 Belviq prescriptions in 2-3 days (20% of Qsymia's first month scripts), the many positive catalysts ahead may give Arena longs cause for celebration. However, Qsymia sales barely increased after the first month and Belviq could suffer the same fate. Until we get data for 3-12 weeks showing increasing prescription rates, preferably exponential instead of the linear increase we saw for Qsymia, short sellers will haunt Arena. If after a few months we see Qsymia-like sales, Arena shares may experience a 30% reduction in share price. That said, I believe short-sellers are on the wrong side of a long-term bet; we will see the opposite trend and ultimately we may see Belviq on the cover of a magazine.