Arena's New Data Doesn't Change Obesity Pill Outlook
Posted: May 30, 2011 10:09 AM by Stephen D. Simpson, CFA
It is understandable that long-suffering Arena Pharmaceuticals (Nasdaq:ARNA) would react very positively to an almost sign of good news. After all, this company's stock has taken a pounding in the wake of the FDA's rejection of the company's drug lorcaserin for obesity. While any positive news relating to efficacy certainly does not hurt the prospects for refiling the drug application and eventually gaining approval, Thursday's news does not solve Arena's biggest problems.
TUTORIAL: How To Analyze Earnings
Is Meta-Analysis the Same as Data Mining?
On Thursday morning, Arena announced data from meta-analyses of three of the trials for lorcaserin. This data was presented at the European Congress on Obesity and indicated that almost half of patients taking two 10mg doses a day saw more than 5% weight loss, more than double the rate of response in the placebo group. More than one-fifth of those same patients saw better than 10% weight loss; nearly triple the response seen in the placebo group.
Unfortunately, most observers are going to regard this data with a shrug. Clauses like "Modified intent-to-treat with last observation carried forward" are tantamount to data mining in many people's eyes, and the FDA has been very aggressive in rejecting such analyses. This is not to say that lorcaserin doesn't work; rather it just seems unlikely that the FDA is going to revise its viewpoint that lorcaserin offers "marginal efficacy" on the basis of a new look at old data (as opposed to a new study showing better outcomes).
Safety Still the Buzzword
It was not efficacy that tripped up Arena, Vivus (Nasdaq:VVUS) or Orexigen (Nasdaq:OREX) with their respective obesity drugs. Rather, it was questions regarding safety and the risk-benefit trade-off. To that end, Arena's new data doesn't help matters. This data does not address the pressing risk that the FDA sees in possible tumorigenesis and the twice-daily group did show an elevated risk of valvulopathy relative to placebo (and this is another hot-button issue with the FDA).
In fact, the safety issues may be getting a little worse for Arena. An update on the BLOOM-DM study indicated that the data had worsened; while the company had previously been able to rule out a greater than 55% risk of valvulopathy, that has now slipped to 67%. Even though the FDA had established a cutoff of 50%, both the agency and the panel seemed to think that 55% was close enough. A higher level than that may put that issue back on the front page with the agency.
Investors should also realize that Arena is taking an aggressive stance with its follow-on safety study. The FDA wanted a 12-month rat study to rule out the risk that lorcaserin leads to mammary tumors. The company instead decided to go with a three-month prolactin study. There is a risk, then, that not only may the data suggest that lorcaserin does have a tumor risk, but that the three-month study won't produce enough statistical power to convince the FDA.
Competitors Working Through Their Own Problems
In comparison to Arena, Vivus seems to have an easier path to approval. The FDA is worried about the risk of birth defects from topiramate (part of the Qnexa cocktail) and is allowing the company to conduct a retrospective study (called FORTRESS) to assess fetal outcomes from topiramate. Unfortunately, Vivus will probably have to include higher-dose studies of topiramate to get the statistical power it needs and that ups the risk of getting bad birth defect data.
Mitigating this risk, the FDA seems willing to allow Vivus to pursue a more limited label that would exclude child-bearing women. What's more, the long-term SEQUEL data showed better than 10% weight loss over two years and the company seems on track for a late 2011 refiling.
The picture is a bit less clear for Orexigen. While the panel had actually voted to recommend approval of Contrave, the FDA is concerned about cardiovascular risks. Orexigen looks as though it will have to launch a CV outcomes study, but further details probably won't be available until after the company meets with the FDA. Unfortunately for investors, such a study could take years (plural) to complete, and resubmission on Contrave is not likely a near-term event.
No Easy Answers
Considering the timeline on Orexigen and the safety issues with Arena (as well as the question of whether Arena is going about addressing the FDA's questions in the right way), Vivus is probably the strongest candidate today.
Even if Vivus' Qnexa is the more promising near-term candidate, there are still questions. For starters, why hasn't Vivus partnered the drug? Perhaps Vivus wants to wait and bargain from a position of strength (FDA approval, for instance), but it is also possible that the deals on the table are not attractive - the sort of method-of-use patents Vivus holds are not often held in great value, and large partners may fear they lack the ability to maximize the value of that drug.
The Bottom Line
In the meantime, obesity just doesn't look like a promising investment opportunity for biotech investors. Bulls can argue that there was similar skepticism about names likeDendreon (Nasdaq
NDN), Vanda (Nasdaq:VNDA) and Human Genome Sciences (Nasdaq:HGSI), and those stories worked out to different degrees. Certainly FDA approval would be a huge boost to any of these three names, but investors need to understand the odds are not favorable - particularly for Arena and Orexigen - even in light of new analyses of old data. (For related reading, also take a look at Weight Watchers: Is There Still Room To Grow?)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
Posted: May 30, 2011 10:09 AM by Stephen D. Simpson, CFA
It is understandable that long-suffering Arena Pharmaceuticals (Nasdaq:ARNA) would react very positively to an almost sign of good news. After all, this company's stock has taken a pounding in the wake of the FDA's rejection of the company's drug lorcaserin for obesity. While any positive news relating to efficacy certainly does not hurt the prospects for refiling the drug application and eventually gaining approval, Thursday's news does not solve Arena's biggest problems.
TUTORIAL: How To Analyze Earnings
Is Meta-Analysis the Same as Data Mining?
On Thursday morning, Arena announced data from meta-analyses of three of the trials for lorcaserin. This data was presented at the European Congress on Obesity and indicated that almost half of patients taking two 10mg doses a day saw more than 5% weight loss, more than double the rate of response in the placebo group. More than one-fifth of those same patients saw better than 10% weight loss; nearly triple the response seen in the placebo group.
Unfortunately, most observers are going to regard this data with a shrug. Clauses like "Modified intent-to-treat with last observation carried forward" are tantamount to data mining in many people's eyes, and the FDA has been very aggressive in rejecting such analyses. This is not to say that lorcaserin doesn't work; rather it just seems unlikely that the FDA is going to revise its viewpoint that lorcaserin offers "marginal efficacy" on the basis of a new look at old data (as opposed to a new study showing better outcomes).
Safety Still the Buzzword
It was not efficacy that tripped up Arena, Vivus (Nasdaq:VVUS) or Orexigen (Nasdaq:OREX) with their respective obesity drugs. Rather, it was questions regarding safety and the risk-benefit trade-off. To that end, Arena's new data doesn't help matters. This data does not address the pressing risk that the FDA sees in possible tumorigenesis and the twice-daily group did show an elevated risk of valvulopathy relative to placebo (and this is another hot-button issue with the FDA).
In fact, the safety issues may be getting a little worse for Arena. An update on the BLOOM-DM study indicated that the data had worsened; while the company had previously been able to rule out a greater than 55% risk of valvulopathy, that has now slipped to 67%. Even though the FDA had established a cutoff of 50%, both the agency and the panel seemed to think that 55% was close enough. A higher level than that may put that issue back on the front page with the agency.
Investors should also realize that Arena is taking an aggressive stance with its follow-on safety study. The FDA wanted a 12-month rat study to rule out the risk that lorcaserin leads to mammary tumors. The company instead decided to go with a three-month prolactin study. There is a risk, then, that not only may the data suggest that lorcaserin does have a tumor risk, but that the three-month study won't produce enough statistical power to convince the FDA.
Competitors Working Through Their Own Problems
In comparison to Arena, Vivus seems to have an easier path to approval. The FDA is worried about the risk of birth defects from topiramate (part of the Qnexa cocktail) and is allowing the company to conduct a retrospective study (called FORTRESS) to assess fetal outcomes from topiramate. Unfortunately, Vivus will probably have to include higher-dose studies of topiramate to get the statistical power it needs and that ups the risk of getting bad birth defect data.
Mitigating this risk, the FDA seems willing to allow Vivus to pursue a more limited label that would exclude child-bearing women. What's more, the long-term SEQUEL data showed better than 10% weight loss over two years and the company seems on track for a late 2011 refiling.
The picture is a bit less clear for Orexigen. While the panel had actually voted to recommend approval of Contrave, the FDA is concerned about cardiovascular risks. Orexigen looks as though it will have to launch a CV outcomes study, but further details probably won't be available until after the company meets with the FDA. Unfortunately for investors, such a study could take years (plural) to complete, and resubmission on Contrave is not likely a near-term event.
No Easy Answers
Considering the timeline on Orexigen and the safety issues with Arena (as well as the question of whether Arena is going about addressing the FDA's questions in the right way), Vivus is probably the strongest candidate today.
Even if Vivus' Qnexa is the more promising near-term candidate, there are still questions. For starters, why hasn't Vivus partnered the drug? Perhaps Vivus wants to wait and bargain from a position of strength (FDA approval, for instance), but it is also possible that the deals on the table are not attractive - the sort of method-of-use patents Vivus holds are not often held in great value, and large partners may fear they lack the ability to maximize the value of that drug.
The Bottom Line
In the meantime, obesity just doesn't look like a promising investment opportunity for biotech investors. Bulls can argue that there was similar skepticism about names likeDendreon (Nasdaq
NDN), Vanda (Nasdaq:VNDA) and Human Genome Sciences (Nasdaq:HGSI), and those stories worked out to different degrees. Certainly FDA approval would be a huge boost to any of these three names, but investors need to understand the odds are not favorable - particularly for Arena and Orexigen - even in light of new analyses of old data. (For related reading, also take a look at Weight Watchers: Is There Still Room To Grow?)Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!