Arena Pharmaceuticals: Moment of Truth Before FDA Advisory Committee

Includes: ARNA, OREX, VVUS
by: Proactive Investor

By Larry Smith

The societal view on obesity is changing from being seen as a personal weakness primarily of cosmetic interest to the view that it is a serious health concern that has a direct and powerful link to diabetes and cardiovascular disease which in turn have a very significant impact on health care spending. Normally pharmaceutical firms trip over themselves to go after a market with the commercial potential of obesity, but there have been no real blockbuster drugs in this category. This is probably because of the still present albeit fading societal view that obesity is not a disease and the fen phen tragedy of 15 years ago.

Fen phen was a combination of fenfluramine and phenteramine, hence the name. Fenfluramine is a drug that causes a feeling of satiety (fullness) and phenteramine stimulates metabolism. They work through different but complementary mechanisms to reduce weight and make for a very effective drug. However, not long after its introduction, patients on fen phen started experiencing damaged heart valves necessitating valve replacement in some patients. How could an obesity drug have this effect? Fenfluramine agonizes (stimulates) a molecular complex called the 5HT2c receptor in certain brain cells that produce a feeling of satiety (fullness).

However, it also agonizes 5HT2b receptors on the cells of the mitral and aortic valves causing excess growth of connective tissue that leads to scarring and then possibly mitral and aortic valve regurgitation. Reports of this valvulopathy began to surface not long after marketing and led to the product’s withdrawal and a flood of law suits.

The “not really a disease” label and fen phen disaster have made drug development for obesity unusually challenging. All drugs have side effects that are often severe or even life threatening so that there is always a tradeoff between therapeutic benefit and safety (side effects). In the case of obesity, there is an extraordinarily high safety hurdle to leap over. Even though effectively treating obesity may be life saving, this is overwhelmed by concern about and intolerance for side effects at a level exceeding that of almost any other drug class.

Three small companies have been locked in a race for developing drugs for obesity; these are Vivus’ (NASDAQ:VVUS) Qnexa, Arena Pharmaceuticals’ (NASDAQ:ARNA) Lorqess and Orexigen’s (NASDAQ:OREX) Contrave. Earlier this year, investor hopes were high that each of these drugs could be approved and they were eagerly awaiting the vetting of these drugs by an expert advisory committee to the FDA.

Qnexa was first in line and ran into a buzz saw at its advisory committee meeting. It is a combination of phenteramine (the drug most currently used for treating obesity and of fen phen fame) and toperamide. Both of these drugs have been on the market for many years and have been used by millions of patients. A number of side effect issues were considered by the advisory committee, but the most troubling one was that toperamide is linked to teratogentocy (birth defects). Toperamide has been used for many years and in millions of patients to treat convulsions and other diseases where this risk has been deemed justified. However, the thought of possibly millions of obese women of child bearing age being treated with this drug was daunting for the committee. Qnexa went down in flames as 10 panel members voted against approval and six voted for.

Next up is Lorqess of Arena which will be reviewed by an FDA panel today. It is based on a new, unique molecule called lorcaserin that was discovered by Arena. Like fenfluramine of the fen phen combination, the therapeutic effect of lorcaserin is to agonize (stimulate) the 5HT2c receptor in certain brain cells that leads to a feeling of fullness. Lorcaserin was carefully designed to be very highly selective for the 5HT2c receptor and to not have an effect on the 5HT2b receptors. Relative to fenfluramine, lorcaserin is 35 times more selective for the 5HT2c receptor than the 5HT2b receptor.

Very much aware that there would be extreme concern about the valvulopathy issue, Arena went to extraordinary lengths to demonstrate that lorcaserin would not cause valve damage and used ultrasound to test for any potential damage in the phase III trials. The results showed that the incidence of valvulopathy in the phase III trials after two years was 2.6% in the lorcaserin group and 2.7% in the control group. With this, many investors concluded that the valvulopathy issue has been put to rest and that other side effects were acceptable. Even after the Qnexa experience, many investors were confident that lorcaserin would get a thumbs up from the advisory committee.

The FDA briefing documents for the advisory committee came out on Tuesday and caused a sharp sell off in the stock. The FDA briefing paper stated that lorcaserin had demonstrated efficacy, albeit modest, and then highlighted safety concerns related to valvulopathy, suicidality and cognitive disorders. Unexpectedly, it also threw in a new and unanticipated concern about mammary tumors in rats, not buying Arena’s explanation and calling the issue unresolved. Today’s advisory committee will likely put valvulopathy and cancer issues on the front burner. Other side effect issues are likely to be viewed as acceptable.

In regard to valvulopathy the panel members will likely be concerned that there is not much data on lorcaserin at higher doses. Given that lorcaserin is only modestly effective in reducing weight, there will be a temptation for doctors to push the dose higher. If doses are pushed higher could there be an increased risk of valvulopathy? Moreover, lorcaserin was not tested with phenteramine in its trials, but in the real world these two drugs will be used extensively in combination. Even though there is no pharmacological basis to suggest that the combination would lead to valvulopathy, who knows. Additionally, the FDA may be concerned that there could be some other unexpected side effect that could arise from the combination. The discussion on cancer is likely to be highly esoteric and who knows where it might go.

Wall Street seems to have concluded that the advisory committee will vote against a recommendation for immediate approval. If so, investors will be closely watching for clues as to how the committee will suggest that issues can be resolved. They might ask for more data on higher doses of lorcaserin and in combination with phenteramine. This might require new trials and, if so, it would be crushing for Arena.

Right now, there is not a lot of hope for a favorable recommendation from the panel. Is there any hope? Perhaps.

Remember that the panel vote against Qnexa was only 10 to 6 even with the terrifying issue of teratogenicity. The two year safety data in regard to valvulopathy might be convincing. Moreover, many drugs have been approved with carcinogenicity concerns in rats. There is some chance that the panel could surprise and vote for approval, but I am not sure that too many betting men would like the odds of that occurring.

Disclosure: No position

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