This Thursday an FDA advisory panel will discuss Arena’s (ARNA) drug Lorqess (lorcaserin) for obesity. The stock has already been cremated, losing more than 30% of its value because the Food and Drug Administration posted what insinuates that, on the one hand, clinical studies of lorcaserin showed the product did not meet the standard FDA guidance for industry developing products for weight management, i.e., that the difference in mean weight loss between the active-product and placebo-treated groups must be at least 5% for a statistically significant difference between the drug to be reviewed and the placebo. In this study, the average weight loss with lorcaserin was about 3% greater than the average weight loss for patients given a placebo.
On the other hand, the FDA said a product is considered effective if it meets at least one of the criteria after one year of treatment, which Arena’s drug might have met. The agency said that about 23% of patients in the placebo group lost 5% or more of their body weight after one year compared to 47% of people being given lorcaserin twice a day. The results were 40% of people who took the drug once daily. This statement did not reach the eyes or ears of investors who were affected by fear more than by encouragement.
The panel of experts was instructed to vote on whether it thinks the benefits of lorcaserin outweigh the potential risks "when used long-term in a population of overweight and obese individuals." The FDA posted a review of lorcaserin on its website Tuesday in preparation for the panel meeting, stating that studies of the product in rats showed there was an excess of breast tumors when dosed at higher levels than a clinical dose that would be used in humans and that there were no imbalances in reports of cancer among people treated with lorcaserin compared to a placebo. As it always does, the FDA reminded the committee that heart-valve disease, psychiatric and memory problems and rat tumors are "three noteworthy safety issues" for the advisory panel to weigh at their public meeting.
Arena posted a document the same day on the FDA website stating that lorcaserin demonstrated clinically significant and statistically significant weight reduction, accompanied by significant improvements in a panel of cardiovascular risk factors. The company also said it would conduct additional clinical studies of the drug if it were to be approved.
The sell-off of ARNA prior to the meeting is nothing new. The fact is that a couple of days before the committees on drug approvals meet, the war starts between the bullish and bearish on the developers of the drugs to be reviewed. Both of the groups use every possible and imaginary argument to prove their points. It is easier for negative analysts and investors with money at stake to get what they want because their weapon is fear, which is much more persuasive than any opposite argument regardless of sincerity, logic, and truth. The bearish have already made enormous amounts of money on ARNA. They no longer need a committee’s rejection to get what they wanted. Lorqess might or might not be approved. The point we want to make, though, is that campaigns of fear prior to the review sessions cause sell-offs whether the drug is approved or not, putting huge profits in the hands of bearish investors.
Lorqess is a selective serotonin 5-HT2C receptor agonist, which causes weight loss through satiety. In vitro testing of the drug demonstrated reasonable selectivity for 5-HT2C receptor over other related targets. The activation of 5-HT2C receptors in the hypothalamus activates propiomelanocortin production, resulting in the satiety required for patients to stop eating huge amounts of food that contribute to heart and other organs’ problems, beside obesity. Clinical trials and other studies supported the theories. The BLOSSOM trial results released on September 18, 2009 met the criteria of statistically significant efficacy. If one were to base his opinion on these data results and the published safety results, it would seem that the obese population might benefit from such a drug prescribed by their primary physician or endocrinologist. Could it be that the return of satiety to patients who have lost it contributes to a better obese patients’ cardiovascular profile by limiting the quantities of food they eat? If this conclusion can be validated, then a lower than required weight loss should not stand as a reason for rejection, provided the drug is safe.
Bottom line, it is not easy to read into the FDA advisory committee members’ minds. Those experts come from different backgrounds, have different perceptions based on personal experiences. Each has his own point of view and draws his own conclusions. Having said that, nobody outside the FDA and the committee can know what will happen on Thursday because it hasn’t happened yet and the outcome can be anything. The only confirmed fact until now is that, like what happened prior to the rejection of Dendreon's (DNDN) drug Provenge by the FDA a few years ago, the bears on the stock have made mountains of profits on their investments, while the believers in the drug lost their shirts. Until Provenge was approved a couple of years following the rejection, many prostate cancer patients died before they got their chance for the vaccine.
Dark clouds look darker in fearful eyes. Regardless of how dark or light the outcome of the committee’s discussion would be, the only confirmed reality is that through fear perpetrated ahead of the discussions, the skeptical (prudent if you wish) investor comes out a winner.
The conclusion we reached does not apply to other drugs that have undeniable superior efficacy results that outweigh, by far, the risk of side effects.