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Eisai's Coats on 2013 Sales of Arena's Obesity Drug

http://bloom.bg/15yNAkb

Arena Pharmaceuticals Provides Update on Upcoming US Launch of BELVIQ® (lorcaserin HCl) for Chronic Weight Management

Better late than never, DEA.

http://finance.yahoo.com/news/arena-pharmaceuticals-provides-upcoming-us-193000856.html

ARNA Q2 earnings report

http://finance.yahoo.com/news/Arena-Pharmaceuticals-prnews-3737388002.html?x=0&.v=1

Arena Pharmaceuticals, Inc. (Nasdaq:ARNA - News) today reported financial results for the second quarter ended June 30, 2010, and recent developments, including the successful Pre-Approval Inspection, or PAI, of the company's Swiss drug product manufacturing facility by the US Food and Drug Administration, or FDA.

"We have recently achieved a number of important milestones, including the establishment of an agreement with Eisai for the commercialization of lorcaserin in the US, the successful completion of the FDA's pre-approval inspection of our Swiss manufacturing facility and the publication of our BLOOM trial results in the New England Journal of Medicine," stated Jack Lief, Arena's President and Chief Executive Officer. "We are continuing to execute on our plans for lorcaserin as we prepare for the September FDA advisory committee meeting and potential regulatory approval."

See disclaimers in the side bar.

Disclosure: long ARNA sharews.

Rodman and Renshaw analyst downgrades ARNA

Elemer Piros, analyst for Rodman & Renshaw, downgraded shares of Arena Pharmaceuticals (symbol "ARNA") a few weeks ago.

His comments:

http://www.bioworld.com/servlet/com.accumedia.web.Dispatcher?next=bioWorldHeadlines_article&forceid=55188

Yet Piros argued that lorcaserin's "weak efficacy" will change the overall risk/benefit discussion when the panel convenes again. Although the drug met the FDA's requirement for a doubling in the percent of patients who lost 5 percent of their weight, it has fallen short on the other efficacy measure, showing 3.6 percent placebo-adjusted weight loss.

I guess he was unaware of the either/or efficacy clause, according to the FDA 2007 Guidance on Weight Management drugs.

http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/ucm071612.pdf

c. Efficacy benchmarks

In general, a product can be considered effective for weight management if after 1 year of treatment either of the following occurs:

• The difference in mean weight loss between the active-product and placebo-treated groups is at least 5 percent and the difference is statistically significant

• The proportion of subjects who lose greater than or equal to 5 percent of baseline body weight in the active-product group is at least 35 percent, is approximately double the proportion in the placebo-treated group, and the difference between groups is statistically significant

Regarding the lucrative Lorcaserin marketing agreement with Eisai, ARNA receives some of the highest revenue splits in the industry. Yet, Piros was unimpressed:

http://www.bioworld.com/servlet/com.accumedia.web.Dispatcher?next=bioWorldHeadlines_article&forceid=55010

Elemer Piros, analyst with Rodman & Renshaw, dubbed the deal "meek" and "fairly modest," noting that the arrangement is "highly back-end loaded, and leaves a lot of lorcaserin commercial risk with Arena shareholders."

Note: at the time of the downgrade, shares of ARNA were trading under $3. A month later, shares are gapping up above $6 in anticipation of a positive advisory committee review on September 16, and full FDA review (PDUFA) on October 22. Piros' price target for ARNA shares is $1.

Rodman & Renshaw is an investment bank specializing in the life science/healthcare industries, among others. ARNA was looking to raise capital prior to its partnership agreement with Eisai. ARNA ended up choosing an alternate route in their latest PIPE financial deal with Deerfield.

See disclaimers in the side bar. No causal relationship implied.

Disclosure: long shares of ARNA.

Cowen is bullish on Arena Pharmaceuticals

Phil Nadeau, biotech analyst for Cowen & Co., is bullish on ARNA. He sees what I've been saying for over a year: a deeply undervalued company with a short-term catalyst in potential FDA approval for Lorcaserin (anti-obesity drug) and long-term viability (deep drug pipeline, valuable intellectual property, and experienced management team).

Unlike some of his peers, Nadeau has a scientific background with a Ph.D. in neurobiology from Harvard University and an B.S./M.S. in electrical engineering and computer science from MIT. Hence, I give his opinion more weight than a captured journalism hack with a degree in political science, whose only function in life is to bash solid biotech companies with promising therapeutics. Adam, are you listening?

http://www.businessweek.com/news/2010-07-01/eisai-will-sell-arena-s-weight-loss-drug-in-the-u-s-.html

The deal was seen as favorable to Arena by Phil Nadeau, an analyst for Cowen & Co. in New York, because “they preserve for Arena a good amount of lorcaserin’s expected profits, without requiring Arena to shoulder any of the marketing costs.” Nadeau expects the company to outperform the Nadsdaq by 15 percent to 20 percent over the next 12 months, he said in a note today to investors.

Arena Pharmaceuticals partners with Eisai on Lorcaserin sales

Arena Pharmaceuticals and Eisai signed a partnership agreement to commercialize anti-obesity drug Lorcaserin upon FDA approval. CEO Jack Lief had targeted the first half of 2010 for a partnership agreement, and it looks like he made this self-imposed deadline. An independent advisory committee will review Lorcaserin's New Drug Application (NDA) on September 16, 2010 and Lorcaserin's Prescription Drug User Fee Act (PDUFA) date is October 22, 2010.

ARNA receives a $50 million upfront payment, and another $90 million upon FDA approval. Other terms of the partnership agreement for US sales are contained in the following article.

http://www.businessweek.com/news/2010-07-01/eisai-will-sell-arena-s-weight-loss-drug-in-the-u-s-if-cleared.html

The agreement includes up to $1.41 billion in milestone payments, plus up to 36.5% of US sales. Given there are 101.23 million shares outstanding, with an additional 28 million warrants, shares of ARNA are severely undervalued in the event of FDA approval, in my opinion. This marketing agreement does not include sales to Europe and Asia, and rest of world (ROW) markets. ARNA is also in the unique position for an investigational drug company in that it has its own manufacturing facilities (in tax-friendly Switzerland) and retains all ownership rights for Lorcaserin. This validates Lorcaserin's lead status as a potential first-line therapeutic treatment for obesity, as Vivus' Qnexa and Orexigen's Contrave are also up for regulatory approval.

Here is my previous detailed analysis of the anti-obesity sector for investigational drugs:

http://gregnguyen.blogspot.com/2010/04/is-magic-weight-loss-pill-just-around.html

See disclaimers on the side bar.

Disclosure: long ARNA shares, sold January put options on ARNA (bullish positions)