Arena Updates Investors on Its Handling of Carcinogenicty Issues Related to Lorcaserin

| About: Arena Pharmaceuticals, (ARNA)

Investment Considerations

Arena Pharmaceuticals (NASDAQ:ARNA) is in the process of addressing issues raised in the FDA’s complete response letter (CRL) of October 23, 2010 and expects to file this response by year end. The company discussed its progress during the second quarter conference call of August 9, 2011. Arena has recently released results addressing two of the issues raised in regard to a two-year carcinogenicity study in rats. One of these was the occurrence and importance of mammary tumors in female rats and the other was detection of astrocytomas in the brains of male rats. These were discussed at length on the call.

I have listened to the conference call and this note summarizes the key points that I think were made. I do not have a conclusion on whether the FDA will conclude that Arena has satisfactorily addressed the concerns raised in the CRL or will ask for more data. There is little in the way of historical precedent to help form judgments. As is evident in this note, Arena’s work has come a long way toward defining the issues and giving greater comfort in the safety of this drug, but is it enough? The FDA seems to be setting incredibly high safety requirements for all drugs and anti-obesity agents in particular.

The market appears to be betting that the FDA will not approve Lorcaserin and this is reflected in the stock price. In the event of acceptance of the CRL and ultimate approval, the short term upside would appear to be much greater than the downside if the drug is rejected. However, I have no clue as to what the FDA may do and I am going to sit this one out.

Mammary Tumors in Female Rats

In the CRL, the FDA questioned Arena’s classification of benign versus malignant mammary tumors in female rats in a two year carcinogenicity study and as a result conservatively combined both the benign and the malignant tumor types in their analysis. In order to answer this FDA concern, Arena formed a pathology working group (PWG) of five pathologists agreed to by the FDA to look at and re-adjudicate the classification of benign versus malignant tumors in the original rat tissue samples. Each pathologist made his own diagnosis and when there was disagreement a consensus was reached.

The PWG concluded that mammary fiber adenomas, which are benign tumors, could be distinguished from the mammary adenocarcinomas, which are malignant tumors. The PWG then concluded that the incidence of the malignant mammary adenocarcinomas was not increased relative to control in the Lorcaserin low and mid dose groups. The incidence of mammary adenocarcinoma was statistically higher in the Lorcaserin high-dose group than in the control group. The low dose was 10 mg/kg/day which is 7 times the exposure that humans would encounter at the proposed human dose. The mid dose is 30 mg/kg/day or 24 times and the high dose is 100 mg/kg/day or 82 times. These results suggest that there is a margin of safety of at least 24 times the proposed human dose.

Aggressiveness of Mammary Tumors

In the CRL, the FDA also requested additional information about the aggressiveness of mammary adenocarcinoma. Some indicators of aggressiveness include; (1) incidence, (2) the time to tumor development, (3) the frequency of multiple tumors developing in individual rats and (4) the role of metastases in tumor related mortality.

The PWG concluded that neither incidence nor time to tumor development differed from controls at the low and mid Lorcaserin doses. However, both reached significance at the high Lorcaserin dose. The PWG described the frequency of mammary metastases as basically the same between control and low-dose group and equivocally increased in the mid and high dose groups. It does appear that there is an increase in lung metastases of mammary gland origin at the mid dose. The lung metastases are only one way to look at tumor aggressiveness and it is difficult to determine what weight the FDA will give this issue.

Mechanism of Action

Arena continues to investigate a mechanism for mammary tumors in rats and has repeatedly said that it believes that it is probably irrelevant to humans. The company is conducting a series of studies that are intended to test the hypothesis there is a causal relationship between Lorcaserin, prolactin and mammary tumor development in rats. No one experiment is expected to be conclusive and conclusions will be drawn from the aggregate data of several studies. This raised the concern of some investors as to whether the prolactin hypothesis is not as solid as was originally implied by the company. The longest duration of any study is three months and Arena anticipates having final data and reports late this year. This timeline should enable the company to submit its complete response around year end.

There was a discussion with the FDA on whether Arena might need one-year studies to assess the hypothesized prolactin mechanism. Arena feels that the one-year suggestion by the FDA was just that, a suggestion, in case the company could not show what was needed in three months. Arena doesn’t anticipate initiating a longer term study for the female rats.

Brain Astrocytoma

The work related to brain astrocytoma in male rats was done to provide greater confidence in the exposure margin for human as compared to rats through estimating Lorcaserin brain levels in the two species. In a protocol submitted to the FDA, brain concentrations of Lorcaserin were measured in cerebrospinal fluid of nine obese volunteers. Arena concluded that humans concentrate Lorcaserin in cerebral spinal fluid 14 times less than do rats. The plasma concentrations at which astrocytomas occurred in rats was at five times the anticipated human clinical exposure. This suggests a safety margin of 70 times the proposed human dose and far beyond the margin that was previously estimated based on plasma exposure alone.

Components of Response to Complete Response Letter

Arena’s planned response to the CRL incorporated seven activities, of which most are complete and the company anticipates that all will be completed by year end in time to file a CRL.

  1. To establish certainty in the classification of mammary tumors in female rats. The PWG’s re-adjudication is now complete and showed that at the low and mid dose, the malignant tumors in these rats were really no different than control animals and only at the highest dose was there a statistically significant increase.
  2. To more accurately estimate the exposure margin for brain astrocytomas observed in male rats. The human CSF study and related analyses that will help to establish a new estimate are now complete.
  3. To investigate a mechanism for mammary tumors and the mechanistic studies are underway. Arena has made good progress thus far, and should have the work completed by yearend.
  4. To address the FDA's concern that mammary adenocarcinomas in female rats appear to be more aggressive with Lorcaserin administration. Arena believes that the data from the PWG's re-adjudication will help address this issue. Perhaps the greatest uncertainty is the occurrence of lung metastases in the mid dose range.
  5. To incorporate the final study report from BLOOM-DM into the overall benefit risk assessment of Lorcaserin. This has been completed.
  6. To further assess abuse potential. Dosing in two preclinical studies is now complete, and the company expects to have the final study reports later this year.
  7. To further define receptor selectivity. This work is ongoing, but should be done by year end.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.