The 15th century Italian philosopher Machievelli wrote:
Whoever wishes to foresee the future must consult the past; for human events ever resemble those of preceding times. This arises from the fact that they are produced by men who ever have been, and ever shall be, animated by the same passions, and thus they necessarily have the same results.
Little did he know how true that would still be 500 years later, or maybe he did?
One can always look to history to forecast the future. We do it in the markets all the time. Historical technical analysis, comparisons of prior financial policies, previous bull and bear markets. In September 1996, Time Magazine featured a cover story on the Fen-Phen craze entitled “The New Miracle Drug?” I recently re-read this piece to gain insight into how a new obesity treatment might be accepted in the market place. I highly encourage those interested in investing in Arena Pharmaceuticals (ARNA) to do the same. Here is a link to the article:
Here are some highlights I took from that article on why I think Lorcaserin will be a major blockbuster and has the potential for being one of the fastest growing drugs in the history of pharma.
· National Weigh Loss Clinics such as Jenny Craig and NutriSystem may look to add Lorcaserin or a Lor-Phen combination into their programs. New weight loss clinics are likely to be created accelerating market acceptance.
· Just three months after the introduction of Redux, doctors are writing 85,000 prescriptions a week. Says David Crossen, an analyst for Montgomery Securities in San Francisco: "What we have here is probably the fastest launch of any drug in the history of the pharmaceutical industry.” – NOTE: If Lorcaserin has a similar uptake, then 85,000 prescriptions a week x 52 weeks = 4.4M new patients potentially within 15mo after launch. Each patient is worth approximately $270 per quarter in gross revenue (180 pills every 90 days x $1.50/pill.) That is $1.1B a quarter in revenue at that acceptance rate. This makes Lorcaserin potentially the fastest grossing drug in the history of pharmaceuticals and could overtake Lipitor as the best selling drug by 2015.
· Lorcaserin is proven not to cause heart valvulopathy like Redux did.
· Lorcaserin’s side effect profile is far superior to Redux, whose common side effects included fatigue, diarrhea, dry mouth and vivid dreams.. Lorcaserin’s only side effect more than 5% over placebo is a mild and transient headache.
· Redux was intended to be taken for a short period of time; Lorcaserin can be taken indefinitely to keep weight loss off.
· America has far more obese people in 2010 than it had in 1996.
As I have discussed in previous Articles about Lorcaserin, it is under FDA review as a mono-therapy. It is a safe, tolerable and effective treatment to be taken as a long term therapy. It provides patients with a very good way to safely lose and keep off an average of 17lbs. It provides patients with a 33% chance of losing at least 10% of their body weight. It improves Blood Pressure, Cholesterol, Heart Rate, HbA1c, Fasting Glucose and Quality of Life. For most patients this will be all they need. Unfortunately for Patients, but fortunately for Investors, Lorcaserin will likely be a lifetime therapy for many of them in order to keep the weight off. For some patients, they will be prescribed a combination of Lorcaserin with Phentermine (Lor-Phen) to help them take off the weight faster or break through weight loss plateaus. Phentermine is only approved for weight loss for up to 12 weeks at a time. For those patients, they will stay on Lorcaserin as a maintenance drug, only taking Phentermine when deemed necessary by their physicians. Weight loss for this combination will likely be close to the Fen-Phen combination of 30lbs average weight loss.
History has shown America has an insatiable appetite for a weight loss drug, just as much as cheeseburgers and french fries. A safe and tolerable weight loss therapy is the biggest unmet need in pharmacology. If history repeats itself, then Lorcaserin has the potential to be a Billion dollar drug within 12 months of launch and one of the best selling drugs in all of pharma by 2015. All of the analysts who cover Arena have grossly underestimated the market for a safe, tolerable and effective weight loss drug.
Disclosure: Long ARNA