Arena Pharmaceuticals (NASDAQ:ARNA) has announced that it was granted U.S. Patent No. 8,778,950, entitled "Cannabinoid Receptor Modulators" by the United States Patent and Trademark Office, for APD371, an agonist of the cannabinoid receptor 2 (CB2). Arena is exploring several potential indications for APD371, including chronic pain, and is currently conducting a Phase 1 single-ascending dose trial. This drug candidate is quite young and perhaps years away from development.
The announcement highlights future pipeline potential for Arena, which is something that the company has been trying to get some focus on over its last few presentations. Arena has taken a few opportunities to discuss its pipeline first when presenting at analyst conferences. For existing investors in Arena, the press release is welcome news for a stock that has seen recent challenges. For investors considering Arena, the press release speaks to future potential of the company. Essentially, this news is speculative in terms of the investment, and while it will not add present value, is something that deserves investor attention as a possible future catalyst. What may be even more compelling is a bigger underlying reason for such a press release... exposure to Big Pharma.
"Intellectual property protection is an important element of our clinical-stage pipeline," said Jack Lief, Arena's President and Chief Executive Officer. "This patent provides us further confidence that APD371 can be exclusive to Arena until at least 2030."
Arena owns patents and pending patent applications covering compositions of matter for APD371 and related compounds, as well as methods of treatment utilizing APD371 and related compounds. Patent applications for APD371 have been filed in 23 jurisdictions, including the United States, Europe, Japan and China. The jurisdictions where patent applications have been filed are estimated to have accounted for more than 95% of global pharmaceutical sales in 2011.
The quotes above are from the press release. What Arena is outlining here is that it has a unique product that is patented and that the company believes could be successful. Is Arena shopping for a partner on this drug already? You can bet that it is. Is a partnership deal imminent? I do not think so. In my opinion, the company is broadcasting the pipeline in an effort to start the process of discussing potential with partners. I do not feel that it is looking for a deal at this stage, though anything is possible. The value of a deal on a pain medication will increase as more studies are done, and right now would be too early to sign on a partner, unless the potential partner threw a ton of cash at Arena.
According to Arena, the US alone has an estimated 100 million adults who are burdened with chronic pain, and pain is the second leading cause of medically-related work absenteeism, with greater than 50 million workdays lost each year. The annual US economic cost related to chronic pain is estimated at $560-$635 billion. The global pain management therapeutics market was estimated at $29 billion in 2010.
APD371, an orally available agonist of the CB2 receptor, was internally discovered by Arena. The investigational drug candidate could be a treatment for several conditions. At this stage, the investigation for this drug on pain management is the focal point. The drug is designed to be highly selective to provide pain relief without psychotropic effects and without the potential for dependence or abuse. Preclinical efficacy with APD371 has been shown in animal models of pain.
Investors should not look for this pipeline drug to add near-term or intermediate-term value to the equity. Investors should treat this news as adding potential speculative future value. What should excite investors here is that the company has what appears to be a good candidate drug in a segment that would be easy to market for a Big Pharma partner. Investors should be aware that advancing this drug through trials will be costly. It is a classic case of investing into something today in the hope that it will eventually develop into something compelling well down the road. If existing and future studies reinforce positive attributes, we can see the value of that speculation increasing. This news is about Arena Pharmaceuticals in two to three years, while Arena Pharmaceuticals today is reliant on the sales of the anti-obesity medication Belviq. This pipeline development is critical to Arena, and the fuel to pay for that pipeline needs to rely on revenue from Belviq. Investors should understand that the connection between revenue generation from Belviq and pipeline development can indeed play off of each other. Strong sales of Belviq will enable Arena to drive toward the strongest possible pipeline deals. Stay Tuned!
Disclosure: The author is long ARNA. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.