European Report Outlines Arena's Prospects There

| About: Arena Pharmaceuticals, (ARNA)

The European Medicines Agency (EMA) assessment report on Arena's (NASDAQ:ARNA) Belviq was released today and for the first time investors are getting some concrete insights into why Arena pulled its application there, and what exactly the issues were that had the EMA taking a stance of non-approval that prompted Arena to withdraw application. Understanding the stance in Europe can give insight on potential hurdles that may be encountered with applications to other countries. Belviq received FDA approval in the United States, and has been on the market here since early June 2013.

When Arena withdrew the European application it came as a surprise to many. The event was announced on a quarterly conference call with little explanation other than that the company could not address questions and concerns with the application in a timeframe that would be required. Rather than face rejection, Arena announced that it voluntarily withdrew its application. Since that day Arena has concentrated on launching Belviq in the U.S., preparing for an application with partner Eisai in Mexico and Canada, and partnering for Belviq in Korea and Taiwan. The subject of Europe seemed relegated to a back burner. Now we have a better understanding as to why.

The 43 page EMA assessment report goes into great detail about the drug, the studies and the company. It is worth while for investors to read because it boils down a great deal of information into one handy document. The key elements surrounding the withdrawal of the European application will be highlighted here.

Based on the review of the data on quality, safety and efficacy, the CHMP considers that the application for Lorcaserin, as an adjunct to diet and exercise for weight control in adult obese patients (BMI ≥ 30 kg/m2), or adult overweight patients (BMI>27 kg/m2) with associated risk factor(s), such as hypertension, dyslipidaemia, cardiovascular disease, type 2 diabetes, or sleep apnea, is not approvable since "major objections" have been identified, which preclude a recommendation for marketing authorization at the present time.

The major objections precluding a recommendation of marketing authorization pertain to the following principal deficiencies:


In rats, several tumor types were increased in males following 2 years exposure to lorcaserin, where the occurrence of schwannoma, astrocytoma, squamous cell carcinoma raise serious concern for human use as no convincing mechanistic explanations have been provided. In males there was increased incidences of fibromas in the subcutis at all dose levels in males, thus no NOEL could be identified. The exposure margin discussions are not reassuring, given the lack of a mechanistic explanation and the fact that the functional activity at rat 5-HT2C receptors was 4-14 times lower than in humans. In both sexes, there were increased incidences of mammary gland fibroadenoma / adenocarcinoma for which the mechanistic explanation related to prolactin is not convincing to conclude on a lack of clinical relevance.

These findings should also be carefully considered in the benefit/risk assessment.

The risk of carcinogenicity in man should be further considered in the light of these preclinical findings, together with a discussion on the potential impact on the risk benefit.

Clinical/Benefit Risk Balance

The overall risk benefit is currently considered negative; Efficacy is considered modest and does not outweigh the concerns over safety, in particular concerns over psychiatric events and valvulopathy. The applicant should further justify the overall risk/benefit and further discuss proposals for monitoring patients in relation to these events in the marketplace.

The first thing to understand is that the stance of Europe does not mean that Belviq will never gain approval. In fact, the EMA leaves room for the possibility that approval could arise out of having additional data and perhaps narrowing the group of proposed patients. The EMA has asked the Scientific Advisory Group (SAG) and the Safety Working Party specific questions which could be construed as keeping a door open for consideration. Clearly there are hurdles with the EMA and there could exist similar hurdles with the application in Switzerland. Brazil works closely with the Swiss, so you can see how there is a cascading effect of sorts where countries that think like and align with the EMA may take a very stringent approach to Belviq approval, where in contrast, countries that align with the FDA may present an easier path to approval and marketability.

In my opinion Arena is being prudent in not pushing the envelope in Europe. There are substantial costs to getting the data required, and perhaps, given some time and a decent history in the U.S. market, the European concerns can be relieved. It would appear that the current leader in the European race is competitor Orexigen (NASDAQ:OREX) with its drug Contrave. Early trial results are viewed in such a manner that Contrave is perceived to be more effective, possibly bridging the concern about risk vs. reward. Contrave is not a shoe-in, but it may have an easier path in Europe.

For Arena investors the key is watching the progress in markets like Korea, Mexico, Canada and Taiwan. These applications are in process already, and could allow for an expansion of the Belviq Market, more data to work with, and a chance to get the proverbial ducks in a row for another test of Europe.

If you have not already done so, consider Europe a mid to long term goal of this company rather than something that will be solved in the next 6 months. Stay tuned.

Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have no position in Orexigen

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