Retail investors were right and Wall Street was wrong about the approval of Arena Pharmaceuticals' (ARNA) lead drug candidate Belviq (Lorcaserin). Arena has won again because Vivus' (VVUS) Qsymia has been rejected by the European Medicine Agency on grounds associated with the dangerous use of the Phentermine component in the drug. The European market is now open to Belviq only.
1. The next Arena catalyst coming is DEA scheduling. Here is an education on the DEA process.
Belviq will be very accessible to patients as a schedule IV drug. The Drug Enforcement Agency, or DEA, is a branch of the U.S. Department of Justice. The Drug Enforcement Administration and the Food and Drug Administration are two independent federal agencies. The DEA evaluates substances to see if they meet the criteria to be a scheduled drug. If so, they then classify the drug into one of five possible schedules according to their abuse potential, addictive nature and whether or not they have accepted medical use for treatment. Schedule V is the lowest possible DEA schedule which includes your typical cough medicine. FDA suggested Belviq be classified as schedule IV, one class higher than cough medicine. Sometimes drugs are re-evaluated and their status as a scheduled or unscheduled drug can change.
Under the 1970 controlled substances act, the DEA is looking at the following eight factors in collaboration with the FDA:
1. Drug's actual or potential for abuse. (DEA)
2. Scientific evidence of the drug's pharmacological effects. (FDA)
3. The state of current scientific knowledge regarding the substance. (FDA)
4. Its history and current patterns of abuse. (DEA)
5. The scope, duration, and significance of abuse. (DEA)
6. What, if any, risk there is to the public health. (FDA)
7. The drug's psychic or physiological dependence liability. (FDA)
8. Whether the substance is an immediate precursor of a substance already controlled. (FDA)
After considering the above eight factors, the DEA administrator must make specific findings that, in turn, determine the appropriate schedule for the drug. The DEA usually follows the recommendation of the FDA because the medical and scientific findings provided by the FDA are binding on the administrator of the DEA. The DEA lacks the authority to schedule a drug without a recommendation to do so from the FDA.
In the case of Arena's Belviq the FDA recommended Belviq be a Schedule IV drug because Belviq has a lower abuse potential than substances classified in higher categories. Belviq did not show any abuse potential in clinical trials, but the fact that Belviq is a brand new drug entity the FDA classified it as class IV. This schedule is one class higher than everyday cough medicine.
Scheduled medications are integral to the provision of medical care. Their uses are wide and varied. In primary care, controlled medications are used for treating coughs, diarrhea, mild anxiety, and pain associated with mild orthopedic conditions such as sports injuries. A prescription for Belviq can be issued by any physician, dentist, podiatrist, veterinarian, mid-level practitioner, or other DEA registered practitioners such as physician assistants (PA). Forty-nine states have enacted laws or regulations that authorize supervising physicians to delegate prescriptive authority to PAs. According to the federal Drug Enforcement Administration (DEA), "controlled substances have legitimate clinical usefulness and the prescriber should not hesitate to consider prescribing them when they are indicated for the comfort and well being of patients."
On June 1, 2010, the DEA rule on Electronic Prescriptions for Controlled Substances became effective. The rule provides practitioners with the option of easily and conveniently writing Belviq prescriptions electronically for fast-fill at a drug store near you.
Belviq will be very accessible and widely used because of the broad label, excellent safety profile, and 12% efficacy proven for the completer patients in clinical trials.
We encourage retail investors to hold their winning stock positions in ARNA, and add to positions if possible, because long investors will be handsomely rewarded for patience in this stock. Reading investor message boards on Yahoo (YHOO), Google (GOOG) and Microsoft (MSFT) can be misleading and often times confusing. The FDA's approval is a testament that Belviq is a super drug because medicines may only be placed on the US market when they are safe, effective and of good quality. Qsymia is not easily accessible because it's available by mail order only with severe cautionary use restrictions. Qsymia will have a hard time because there is not a single documented FDA drug ever that has achieved blockbuster status being sold through mail order. This is not the case with Belviq.
In fact, the very broad label the FDA gave Belviq actually gives physicians, broad discretion in the way a patient's illnesses, diseases, or co-morbidities can be managed with the use of Belviq. The demand for Belviq will come from knowledgeable physicians who have their patient's best interests at heart.
2. Obesity epidemic gives Arena's prescription drug Belviq blockbuster drug status.
We learned from past blockbuster prescription drug sales history that even non-epidemic treatment drugs' like Pfizer's (PFE) Lipitor (Cholesterol); Zyprexa Antipsychotic Eli Lily (LLY); Levaquin Antibiotic Johnson & Johnson (JNJ); Concerta ADHD/ADD Johnson & Johnson; Protonix Antacid Pfizer; Plavix Anti-Platelet Bristol-Myers (BMY); Sanofi-Aventis (SNY); Seroquel Antipsychotic AstraZeneca (AZN); Singulair Asthma Merck (MRK); and Actos Type 2 Diabetes Amgen (AMG) can be blockbuster drugs reaching sustained sales in excess of one billion dollars.
Arena's Belviq as a schedule IV drug will be a blockbuster drug, given the broad labeling for comorbidities.
3. DEA schedule IV makes Arena a buyout, merger, or partner candidate.
Health Insurance coverage is more readily available to prescribed drugs since the physician establishes the medical need for the drug. According to Ibisworld, 13 blockbuster drugs will lose patent protection through 2013. One example, between 2010 and 2012, drugs that make up 42% of Pfizer pharmaceuticals revenue will lose patent protection. Big pharmaceutical companies need blockbuster drug companies more than ever. In this environment of shrinking blockbuster sales, a Big Pharmaceutical can easily afford to buy Arena in cash or stock and cash combination. Accountants and financial experts will agree that pharmaceutical companies like Pfizer, Abbot Labs (ABT), Astrazeneca, Novartis (NVS), and Merck & Co.,, just to name a few, have existing complimentary marketing infrastructure capable of making Belviq sales a source of virtually pure profit. In addition, Arena comes with some enticing benefits for a pharmaceutical suitor - 10 year Swiss Tax Haven and R&D Write-offs. Confidential Wall Street sources tell me a Big Pharmaceutical company has hired an investment bank to evaluate Arena buyout potential. A Big Pharmaceutical company will not wait until Belviq roll-out because Arena's stock price rise will be to high for a buyout to make sense.
4. Arena is a strong buy all the way up to $20/per share.
Here is why Arena is a red-hot buy. We like using Investor's Business Daily's proprietary stock performance technology:
Price and Volume:
Relative Strength: 99 (It's flashing 99 out of a possible 99)
% of 52 Week High: -33.1%
Price vs. 50-day Moving Average: -3.51%
50-day Average Volume: 14,347,400
Supply and Demand:
Market Capitalization: 1.96 B
Accumulation/Distribution Rating: A
Up/Down Volume: 0.7
% Change In Funds Owning Stock: 40%
Qtrs of Increasing Fund Ownership: 2
Arena's stock is temporarily beholden to the wave of short interest attacks sitting at all time highs of 43,934,871 as of August 31, 2012.The shorts, according to some experts who teach short selling, appear to have been misled into believing DEA Classification is the equivalent to FDA approval. This is absurd, and the short's are wrong again. No matter what DEA classification Belviq is given, it will be a blockbuster drug. Eisai will announce pricing and when Belviq will be available.
Arena's stock is trading at an extremely low price of $8.55/share. The 52-week high is $13.50/share. Arena is a long-term growth stock and the floodgates are about to open, The first catalyst is receipt of DEA classification. Then, we will have an obesity drug with broad FDA labeling, ready to treat obesity related comorbidities, by physicians who hold the key to demand and will use this drug with broad discretion. Simply put, the best single agent for obesity and its associated diseases. Arena is a value buy all the way up to $20/share, ahead of DEA classification expected soon. The news about the company's fundamentals will get better with the stream of news from the DEA, EMA 120-day questions response filing by October 25, 2012, Eisai Pricing, Belviq Roll-Out, and the Big Pharmaceutical deal which could come at any time.
The stock price will continue to move higher in this new price uptrend. Now is an excellent time to initiate a position or add to your stock positions just like the institutional funds have been doing according to investors business daily's proprietary technology.
Disclosure: I am long ARNA.