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J. P.Morgan latest analyst report on ARNA

|Includes:Arena Pharmaceuticals, Inc. (ARNA), OREX, VVUS

J. P.Morgan latest analyst report on ARNA:
This morning, Arena (NASDAQ:ARNA) released what we consider to be disappointing Phase 3 results from the BLOSSOM obesity trial. Lorcaserin’s efficacy was once again underwhelming – even worse than the prior BLOOM trial – and, indeed, some may debate whether this even satisfies FDA requirements for approvability. Either way, we're concerned with any obesity drug having to argue semantics from an efficacy standpoint with the FDA. On the positive side, safety was reassuring and thus makes lorcaserin potentially amenable to combination use. However, no such trials have been conducted (or are even planned), which we continue to find troublesome. Remain Neutral on ARNA.
BLOSSOM background. Recall that BLOSSOM is a Ph 3 trial evaluating lorcaserin (10mg QD and 10mg BID) for 52 wks in 4,008 pts (BMI 35.9, baseline weight 220lbs), including those with valvulopathy.

Pbo-adjusted weight loss even worse than BLOOM. BLOSSOM results showed that lorcaserin achieved pbo-adjusted weight loss of an anemic 3.1% and 2% in the BID and QD arms, respectively (pbo=2.8%). These results are even weaker than BLOOM, where lorcaserin showed disappointing 3.6% pbo-adjusted wt loss. For comparison, we note that Qnexa recently showed pbo-adjusted wt loss of 8.6-9.4%, and Contrave has shown 4.8-5.2%.
Lorcaserin may satisfy categorical hurdle. The proportion of pts losing 5% or more of their body weight in the BID and pbo arms of BLOSSOM was 47.2% and 25%, respectively (QD=40.2%). While this may be viewed by FDA as meeting the guidance requirements, it still remains an open question whether the magnitude of weight loss benefit will be viewed as clinically and commercially significant. Recall that in BLOOM, lorcaserin met the categorical hurdle (48% vs. 20%). By way of comparison, Qnexa (EQUIP 45% vs 17% pbo and CONQUER 62% vs 21% pbo) and Contrave (45-56% vs. 16-19% pbo) handily cleared this hurdle.

Recap of FDA guidance. As a reminder, the current FDA draft guidelines for obesity drugs read “... A product can be considered effective for weight management if after 1 year of treatment either of the following occurs: 1) The difference in mean weight loss between the active-product and placebo-treated groups is at least 5% and the difference is statistically significant, or 2) The proportion of subjects who lose greater than or equal to 5% of baseline body weight in the active-product group is at least 35%, is approximately double the proportion in the placebo-treated group, and the difference between groups is statistically significant.” Clearly, lorcaserin does not meet the first requirement, and is right on the cusp of the second.

Important secondary endpoints remain a question mark. Little information was provided in the press release regarding lorcaserin’s effect on important secondary endpoints such as blood pressure, cholesterol, blood glucose, etc. All that was said is there was either a significant improvement or “strongly favorable trends” on these measures. In our view, an obesity drug’s impact on these key risk factors is critical in forming the overall risk/benefit profile for a drug and potentially securing reimbursement. We look for incremental information on the conference call.

Safety is the lone bright spot, and makes lorcaserin amenable to combination use. As with BLOOM, there were no surprising safety signals in BLOSSOM. Overall, more lorcaserin-treated pts completed the trial than pbo (57% BID, 59% QD, 52% pbo). Of note, discontinuations for adverse events were slightly higher with lorcaserin (7.2% BID, 6.2% QD, 4.6% pbo). Importantly, no difference in the rates of valvulopathy were seen (2% BID, 1.4% QD, 2% pbo). Indeed, the company noted that an integrated analysis of the ECHO data ruled out the risk of valvulopathy. Recall that FDA required the company to rule out a ≥1.5 fold relative risk of valvulopathy in pooled BLOOM and BLOSSOM data.