Not too long ago investors threw lots of money at Arena Pharmaceuticals (ARNA). But it seems those days are over. After finishing high in March, the stock price has slowly declined as investors have become increasingly nervous about the impending FDA review of the company's anti-obesity drug, Lorcaserin, set for May 10. The FDA then has until June 27, to make its final decision.
This is the second time Lorcaserin will face an FDA panel. In 2010, the FDA rejected the drug due to potential heart valve damage and also questioned the overall effectiveness of the drug. Currently, the stock hovers around $2 per share. For those looking for a way into the anti-obesity drug market without having to spend a fortune, consider Arena - for very short-term investing, that is.
Because of Lorcaserin's previous rejection, and other anti-obesity drug treatments up for FDA approval this year, investors seem skittish when it comes to Arena. Regardless of the FDA's decision, confidence in Lorcaserin seems little to none at this point. In addition to developing anti-obesity drug treatments, the company conducts research and development for multiple sclerosis, hypertension, and type 2 diabetes drug treatments. Currently, the company does not have any drug treatments on the market at this time.
In the meantime, Arena continues to move forward with the research and development of Lorcaserin. The company announced at the end of March that the European Medicines Agency accepted its application for review. The announcement did not mention when the review would take place. If approved, Lorcaserin would help patients who are overweight and who also have additional weight-related issues such as hypertension and Type 2 diabetes. Lorcaserin works with receptors in the brain to make the body think it is full after a meal by triggering the brain to release a hormone called serotonin. This hormone not only helps people feel full, but also provides a satisfying, calming feeling between meals.
However, this is not new science. Other anti-obesity drug treatments including the controversial Fen-phen (banned by the FDA in 1997) relied on boosting serotonin levels in the body to induce weight loss. The potential benefits of lowering blood pressure and stabilizing blood sugar for those with Type 2 diabetes help Lorcaserin stand out from the competition.
Investors should carefully consider Arena since the company doesn't actually manufacture any other drug treatments for obesity or any other disease or condition. And while the company has other drug treatments in its pipeline, these drugs, in various stages of testing, may not available for sale or even FDA approval for years. If currently investing in Arena, it's best to monitor FDA and European Union approval or rejection closely to decide whether to continue investing in drug treatments that may never reach the marketplace. In addition to having to wait for FDA approval, investors also need to contend with data gathered by the company that shows Lorcaserin may not be very effective for weight loss.
For the past 10 years, pharmaceutical and biotech companies have worked to develop anti-obesity drugs that meet FDA approval standards. Most companies have failed. Due to the potential side effects and safety issues associated with these drug treatments, the FDA and other public health agencies worldwide must use caution when deciding to approve these drugs for public use.
Unfortunately, anti-obesity drugs currently on the market including Xenical (prescription) and Alli (non-prescription) have received some very negative attention lately for causing a variety of health-related issues including fatigue, headaches, cardiovascular issues, depression, hypertension, and liver problems. It is because of the failure of other drugs that the FDA must be very careful. Investors should follow the FDA in choosing very carefully the companies developing anti-obesity drugs, as investing too much too soon may result in big losses.
Other drugs taken off the market in the United States and in Europe include Acomplia (rimonabant), manufactured by Sanofi (SNY) and Meridia (sibutramine), manufactured by Abbott Laboratories (ABT). Sanofi removed Acomplia from the European market in 2008 after reports of depression and anxiety. Acomplia never received FDA approval for sale in the U.S. Abbott removed Meridia from the U.S. market in 2010 at the request of the FDA. The drug apparently caused an increase of stroke and heart attacks in those taking it.
It is due to these failures that the FDA must continue to monitor new anti-obesity drug treatments to ensure that patients taking these types of medications understand that there are risks, but also to keep these risks to a minimum.
In addition to Arena, there are a handful of other companies developing anti-obesity treatments. Eagerly awaiting approval for its drug treatment, Qnexa, also rejected by the FDA in 2010, Vivus (VVUS), had to complete additional testing and perform extensive risk assessments in order for the FDA to grant pre-approval for the drug in February 2012. And since submitting additional risk assessments, the official FDA review date was moved from April 27, to June 27. This just shows how diligent the FDA is when anti-obesity drugs are concerned.
Orexigen Therapeutics (OREX) will soon try to convince the FDA that its anti-obesity drug, Contrave, helps patients lose weight without harmful side effects including cardiovascular disease. After the drug was rejected at the start of 2011, the FDA asked Orexigen to provide more data pertaining to cardiovascular safety prior to granting the company review time by an FDA panel. The company complied and has since received a special protocol assessment from the FDA, and is working with the agency to complete a clinical trial to ensure public safety.
Investors need to closely monitor FDA approval before making a move in the anti-obesity market. Unfortunately, investors will need to sit tight for another few months until these decisions are made and then make a few decisions of their own.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
