Problems with US Launch
The Drug Enforcement Agency (DEA) proposes to place lorcaserin in Schedule IV of the Controlled Substances Act. The proposal is on the recommendation of Assistant Secretary for Health of the Department of Health and Human Services (HHS) and on an evaluation of all other relevant data by DEA. Those adversely affected or aggrieved by the proposal were to file their comments by January 18, 2013. Hopefully, the rule becomes effective after a 30-day wait and Eisai, Arena’s marketing partner, can then start selling Belviq.
It would also be of interest to investors who fancy the obesity drug space that Vanderbilt University, a private research university in Nashville, Tennessee is partnering with GlaxoSmithKline plc (ADR) (NYSE:GSK) to develop a new obesity drug that is safer and would not raise blood pressure in patients. Phase 1 trials will begin in 2016 and we can expect similar hurdles this time also if at all there are any positive results. The target of the GSK research is melanocortin-4 receptor, which plays a role in balancing food intake and energy expenditure.
Conclusion
Bureaucratic delays, necessary or unnecessary cannot and should not be taken lying down. Whether or not there is substance in Arena shareholders’ accusation that DEA’s bureaucratic delay is unnecessary is a debatable issue. If shareholders are to be believed, then hedge funds are conspiring with DEA to destroy Belviq. With additional 4.25 million shares purchased by institutions, institutional holding of ARNA stock has increased by 5.7%.
With the 30-day deadline set by DEA rules about to expire, Arena and its marketing partner are sure to make a strong launch of Belviq and gain advantage over Vivus’ Qsymia. However, analysts have lowered forecast of 2013 sales by 70% – down from $115 million to $35 million. JPMorgan analyst, Cory Kasimov, however, forecasts 2013 sales at $74 million growing to $481 million in 2016.
So far so good in as far as the US market is concerned.
Forget DEA and hedge funds for the time being but EMA’s concerns are for real. Even at the cost of repeating what I said in the beginning, I would like to bring to notice the fact that it took thirteen long years for the second and third diet pills to be approved by the FDA. With obesity assuming epidemic proportions, it is a major concern in the US. If despite that the FDA has been wary of approving diet pills, then there is definitely a reason for that.
While delay by EMA is not the end of the world for Arena, losing the European market will have a major impact on Arena’s revenues. Already, the ARNA stock has suffered a loss of 14.2% after CHMP failed to approve Belviq in its last meeting in January (not assuming a correlation, however). This means another wait of 30 days for a ruling to come.
Safety issues must necessarily be addressed. EMA’s delay in approving Belviq indicates that they think the FDA has overlooked certain safety issues. If Arena’s answers to the EMA’s questions in the 180-day list fail to satisfy the agency, then doubts about FDA approval may have some substance giving Areana investors a reason to worry. I mean, can we trust the Europeans enough to doubt the FDA’s ruling?
The article What Is It With ARENA and the EMA? originally appeared on Fool.com and is written by Sujata Dutta.
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