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Arena (NASDAQ:ARNA) has revised an 8K filing with the SEC less than 24 hours after the initial 8K was filed. The revised filing announces that there was a serious adverse reaction to 1 of the 40 patients in the Phase Ib trial of APD811, a pulmonary arterial hypertension drug. What was a good positive yesterday has turned into a negative today with focus on the change.

The initial filing stated:

"On August 28, 2013, we announced the completion of a Phase 1b clinical trial for APD811, an investigational oral prostacyclin, or IP, receptor agonist intended for the treatment of pulmonary arterial hypertension, or PAH. We plan to initiate a Phase 2 clinical trial for APD811 in the first quarter of 2014.

This randomized, double-blind and placebo-controlled Phase 1b clinical trial evaluated the safety, tolerability and pharmacokinetics of multiple-ascending doses of APD811. We previously evaluated single-ascending doses of APD811 in a Phase 1a clinical trial.

In the Phase 1b clinical trial, 40 healthy volunteers received APD811 and 15 received placebo, and the safety profile of APD811 was characteristic of IP receptor agonists. No serious adverse events were observed, and the most frequent treatment-emergent adverse events were headache, nausea and jaw pain. The results of the Phase 1 program led to the decision to proceed with Phase 2 development of APD811, which will include further exploration of dosing regimens in PAH patients."

The revised filing stated:

"On August 28, 2013, we filed a Form 8-K regarding the completion of a Phase 1b clinical trial for APD811, an investigational oral prostacyclin, or IP, receptor agonist intended for the treatment of pulmonary arterial hypertension, or PAH. We are filing this Form 8-K to revise the information previously disclosed regarding adverse events.

The randomized, double-blind and placebo-controlled Phase 1b clinical trial evaluated the safety, tolerability and pharmacokinetics of multiple-ascending doses of APD811. We previously evaluated single-ascending doses of APD811 in a Phase 1a clinical trial.

In the Phase 1b clinical trial, 40 healthy volunteers received APD811 and 15 received placebo, and the safety profile of APD811 was characteristic of IP receptor agonists. The most frequent treatment-emergent adverse events were headache, nausea and jaw pain. One serious adverse event, transient atrial fibrillation, occurred in a single patient, and the study investigator considered it to be possibly treatment related.

We plan to initiate a Phase 2 clinical trial for APD811 in the first quarter of 2014. The results of the Phase 1 program led to the decision to proceed with Phase 2 development of APD811, which will include further exploration of dosing regimens in PAH patients."

As you can see, the company has shifted from "no serious adverse events were observed" to "One serious adverse event." The adverse event was transient atrial fibrillation. The serious adverse event was also unreported in the Arena Pharmaceuticals press release about the conclusion of the trial.

Transient atrial fibrillation is seen as a precursor to stroke. In a study reported at the European Society of Cardiology meeting, 2.6% of the patients who did not have transient atrial fibrillation experienced a stroke or transient ischemic attack a year after discharge from the hospital compared with 9.2% of the patients who did have transient atrial fibrillation in the hospital.

For investors in Arena, this event is not good news. While there is a chance that the event may not have been study related, the fact that the company had to change its stance on the SEC filing puts a big focus on the event that may not have otherwise existed. Of course, this article also calls attention to the matter, but it is prudent for investors to understand this dynamic. In my opinion, had the event been included in the first SEC filing, it would have been digested and accepted by the Street. Now, we have a whole series of question marks that will develop. We have gone from a typical study that will bring about a host of positive and negative data to a situation where there's appearance of some discord within the company.

One must ask the basic question. How did this company issue a press release and an 8K stating no serious adverse events occurred only to follow all of that up 24 hours later with the sudden announcement that there was indeed an adverse event. It would seem that there may have been disagreement among the management of the company as to how to interpret the event.

Even worse, the adverse event surrounds the cardiovascular issue that is a hot button topic. It was cardiovascular, tumor, and efficacy vs. benefit issues that brought about Arena withdrawing its application of FDA approved Belviq from Europe. Had the application not been withdrawn, Belviq would have received a rejection there.

This series of events is not a positive for the equity. Whether this is a bump in the road or something more is yet to be seen. Investors should be seeing the week 11 sales figures of Belviq tomorrow, and as usual, the equity will react.

Yesterday I characterized Arena as a buy because it was near 52-week lows and the company had just reported positive pipeline developments. This morning, I feel it is important that perhaps this APD811 news get digested before pulling any triggers. Arena is a heavily traded stock by active investors. The bear side certainly got some ammunition this morning. I am cautious about the short-term prospects here, and exactly where the bottom will be.

There is no spin to this. The company, by filing these 8Ks the way it has, is calling into question the trust factor. There is still great potential with Belviq, but until insurance companies get on board with anti-obesity coverage, sales will have more modest growth. Stay Tuned!

Source: Arena Revises SEC Filing On APD811