Arena Pharmaceuticals (NASDAQ:ARNA) announced some pipeline news this morning and the stock is trading up in pre-market. The company's APD371 is a drug candidate for the treatment of pain. Arena characterizes APD371 as a highly selective agonist of the cannabinoid 2 (CB2) receptor.
Arena is best known for its already approved anti-obesity treatment Belviq, but hopes to see several pipeline candidates achieve commercial success and bring about lucrative partnership deals. APD371 is still in its early stages of development and while the company could partner it at any time, may need to progress through Phase 2 to bring about the best deals.
The Phase 1b trial was randomized, double-blind, and placebo-controlled. It included 36 healthy adults and was designed to evaluate the safety, tolerability and pharmacokinetics of multiple-ascending doses. Cohorts of 12 subjects (9 active, 3 placebo) were administered doses of 50 mg, 100 mg, or 200 mg of APD371 or placebo three times daily for 10 days, and in connection with the pharmacokinetic evaluation, one time on the 11th day. The most common adverse events were headache and nausea.
All adverse events were classified as mild, and there were no serious adverse events reported. There was one discontinuation in the high-dose group due to an adverse event of mild thirst and somnolence. Reductions in blood pressure and heart rate were observed, but none were symptomatic or resulted in an adverse event. Drug levels at all doses tested in the trial, including the lowest dose, were well above those believed to be needed to stimulate the CB2 receptor.
The reason that the company and investors are excited about APD371 is that the drug can deliver benefits without psychotropic effects, loss of efficacy over time, or the dependence, abuse potential or adverse event profile associated with other pain treatments that are on the market. Many pain drugs on the market alter the mood and impact mental activity. In addition, many current treatments are highly addictive. APD371 demonstrates the potential to treat pain without these risks.
From an equity standpoint, this is welcomed news for many long-term investors. PA pipeline is always fraught with risk, and in some cases, tens of millions of dollars can be spent only to see failure. With APD371 passing this clinical trial, the company can move forward into planning Phase 2 clinical trials. The results offered by Arena today remove an element of risk from the equity itself, thus helping to provide a stronger foundation for the stock.
This one trial will not send the equity soaring, but that is not necessarily, what is needed at this stage. It is a new result than can help the company in a few ways that many investors will not consider. It is no secret that Arena's cash situation is less than ideal. The last time Arena was near the current levels of cash, the company diluted shares with an offering. That possibility exists again, and that has been an overhang on the stock. Having positive results on the pipeline could be enough to entice a private placement instead of pure open market dilution or even worse, convertibles.
In my opinion, the big player in the Arena pipeline is APD334, a drug currently in Phase 2 trials. APD334 has a lot of potential in terms of treatments, and a lot of potential for a lucrative partnership deal. Results on APD334 are about a year away. Any positive developments in the pipeline prior to the APD334 results carry more importance than if the company was flush with cash.
The pipeline also includes nelotasirin, a drug candidate that was sold off to Riovant for $4 million in upfront cash and is now in Phase 2 trials with Axovant (NYSE:AXON) for the treatment of dementia and Parkinson's. Arena had placed this drug on the shelf after it failed clinical trials for sleep disorders, but it was revived last year and sold off for a modest upfront payment and royalty rights.
Also in Phase 2 is a drug called Ralinapeg for the treatment of vasospastic diseases, such as Pulmonary Arterial Hypertension. This drug candidate is fully controlled by Arena. Arena is partnered with Ildong on yet another drug known as Temanogrel. Temanogrel is in Phase 1 trials and has been for quite some time.
The bottom line with Arena is that the play on this company is with the pipeline. Sales of the already approved Belviq are much lower than needed to drive or even fund the company. A commercial success is needed, and as the pipeline advances, the chances of such a success improve. The news today helps to not only advance APD371, but also can help to firm up the foundation of the pipeline moving forward. I anticipate that the news will help stabilize the equity, and that doors for partnering and funding just opened up a little bit wider. Stay Tuned!
Disclosure: I am/we are long ARNA.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I have no position in Axovant