Flight to Safety

Flight to Safety from Peak Prosperity on Vimeo.

https://vimeo.com/172160052

Japanese Pension Funds Seek Safety in Gold

Good news: some big Japanese pension funds are finally starting to see the benefits of diversifying their assets into gold.

Bad news: they still don't get it--they're choosing gold ETF's, i.e. paper gold to gain exposure into the gold market.  For the nth time, they should be buying physical gold, because when a financial catastrophe occurs (and that is one of the biggest reasons for having exposure to gold), having legal claim to gold is equivalent to an empty claim.

But hey, who am I to judge?  They manage trillions of yen.  They're the experts, right?  Then why have they entered the party 14 and 4 years later than me--with prices up as much as seven-fold in that time span?

http://online.wsj.com/article/SB10001424127887324407504578186710415464652.html?mod=googlenews_wsj

Pregnancy, VVUS and ARNA

This post came from an ARNA message board.

First of all there will never be any human pregnancy prospective studies done. All proven teratogens are known from retrospective studies or case control studies or studies done on animals. This is true of any drug brought to market.

To prove that an agent is a teratogen one might show:


•It is more often associated with individuals having a specific defect than with appropriately matched controls.
•A specific malformation or group of malformations is consistently associated with exposure to the teratogen.
•Biologic plausibility; the agent was present at the time in organogenesis when the anomaly would have to occur. As an example, it is unlikely that exposure to drug X in the third trimester would cause a cleft palate because the palate closes in the first trimester.
•The anomaly was less common before the presumptive teratogen was introduced. Phocomelia (missing upper parts of arms or legs), as an example, was almost nonexistent before the introduction of thalidomide.
•Experimental animals will develop the anomaly if given the presumed teratogen at the appropriate stage of organogenesis.

The BIG difference is that VVUS had a known teratogen!!!.
Using your logic no drug would ever be approved for lack of pregnancy studies.

Daniel
UCLA MD

Advisory committee votes 10 - 6 No on Qnexa

As I expected, the independent advisory committee voted 10 - 6 (one panel member later changed his vote) against Qnexa being recommended for FDA approval. Shares in VVUS were halted this morning, but when trading resumes, the shares will plummet.

Shares of ARNA, a competitor to VVUS in the anti-obesity sector, gapped up 34% to a high of $5.72 in anticipation of the vote. After the Qnexa outcome, ARNA shares dropped in sympathy below $4, down approximately 10% for the day. However, upon further inspection, lack of sufficient safety data doomed Qnexa, but ARNA's Lorcaserin has a strong safety profile. Hence, I believe shares of ARNA will rebound leading up to its September 16 advisory committee review.

Edit: as I posted this, ARNA shares are recovering close to their previous close above $4 in after-hours trading. All that volatility, and ARNA ended up its round trip near yesterday's close. What a wild day of trading!

Wall Street was bullish on Qnexa's efficacy, but once again, safety ruled.

See disclaimers on the side bar.

Disclosure: no position in VVUS (and glad). Long ARNA shares.

Anti-obesity treatments gaining traction

Thanks to my good friend Dick for finding this timely article on weight-management drugs:

http://www.signonsandiego.com/news/2010/jan/31/dash-for-diet-drug/

At least 3 candidates are seeking regulatory approval from the FDA within the next year. The obesity market is huge (no pun intended). Two-thirds of Americans are overweight, and one-third are obese (BMI of 30% or more). Include Europe and emerging countries whose standard of living is rising, and the potential market for weight-management treatments is staggering.

The products hitting the sweet spot of safety first, tolerability, and efficacy will be blockbusters.

Disclosure: long ARNA shares.

ARNA announces BLOSSOM results

In one of the wildest trading sessions in recent memory, shares of Arena Pharmaceuticals (symbol "ARNA") surged 40% in after-hours trading last night, after they issued a press release they would announce top-line results for Lorcaserin, their weight loss drug. Obviously, investors were anticipating that results would be positive. At midnight, when ARNA did publish BLOSSOM results, their second of two pivotal, Phase III clinical trials, the headline mentioned that positive results were achieved for efficacy and safety. The pre-close and after-hours buying of calls and shares appeared justified, as rumors of leaks were pervasive among trading desks.

However, once the data was released, the market's reaction in pre-market morning trading was negative, once again underwhelmed by Lorcaserin not meeting the 5% average placebo-adjusted weight loss. To make matters worse, unlike BLOOM, the categorical 5% weight loss did not exceed double the placebo categorical 5% weight loss either. Thus, shares dropped all the way to $3.80 from last night's $6.76 close.

Upon further analysis and cooler heads, shares have walked up back to the high $5's, meaning after all that whipsawing (which enabled shorts and market makers to profit immensely), shares of ARNA are above water from last night's by almost $1 per share.

Why have the shares rebounded, if the efficacy numbers are "bad"? First of all, BLOSSOM confirmed BLOOM's efficacy AND safety and tolerability. This is significant, as the weight loss sector is littered with marginally effective and intolerable drugs (phentermine has many adverse side effects) to the downright dangerous and lethal (Wyeth's fen-phen was withdrawn due to cardiac valvulopathy). Lorcaserin, on the other hand, has a clean safety profile very similar to a placebo.

BLOSSOM's 20 mg dose confirmed BLOSSOM's efficacy numbers, even if the placebo control group in BLOSSOM had better efficacy than the place group in BLOOM. But more importantly, the FDA guidance for weight loss efficacy needs further scrutiny. It is a minor but important point--one that even ARNA CEO Jack Lief missed in previous presentations, but one I captured several months ago.

ARNA's presentation and conference call today did catch incorporate it, because it is an essential point. According to the guidance established in 2007:

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

Notice 35% of the Lorcaserin-active group has to lose at least 5% body weight. That group has to also be APPROXIMATELY double the placebo-treated group. It doesn't have to EXCEED the doubling of the placebo control group. It did EXCEED in BLOOM, but both BLOOM and BLOSSOM meet this "approximately double" co-primary end point. Additionally, when pooled together, BLOOM and BLOSSOM results exceed it.

I've covered other aspects on why Lorcaserin has a high probability of getting FDA approved, so I won't go into them here. But it is also worth noting that while the average placebo-adjusted weight loss end point of 5% was not met in BLOSSOM either, the either/or component of the co-primary end points (the other being categorical weight loss discussed above) is a good indicator that Lorcaserin is FDA approvable.

And with a clean safety and tolerability profile, it remains the best candidate to achieve FDA approval first, and perhaps reach the broadest target market of obese and overweight patients. The finish line is closer for ARNA, and the market is starting to warm up to it.

Disclosure: long ARNA shares.

Lorcaserin clinical trial

Ed Susman, a medical doctor who participated as a patient in an obesity clinical trial, blogs about it on MedPage. He still doesn't know if he was part of the Lorcaserin group or the placebo control group--as it is a double-blinded study, but the extreme weight loss for the diabetic points toward the Lorcaserin active group.

Here's the video:

http://neurologicalcorrelates.com/wordpress/2009/02/20/weight-loss-trial-final-report-52-pounds-of-fat-melted-away/

Here's his personal account of it:

http://www.medpagetoday.com/PrimaryCare/Obesity/13506

The results of Bloom, the first of two pivotal Phase III clinical trials, were announced in March. Researchers were upbeat about Lorcaserin's FDA approvability, due to its safety and tolerability profile, as well as meeting one of the FDA weight loss efficacy guidances. Wall Street analysts were underwhelmed, causing the share price of Arena Pharmaceuticals to decline by 25% overnight. I later picked up some more shares when the price per share (pps) bottomed out around $2.50.

Results for Blossom, the second of two pivotal trials will be announced next month, and due to the statistical significance of Bloom's 3000+ patients, Blossom results for 4000+ patients should be similar to Bloom's.

Dr. Susman participated in the non-pivotal Bloom-DM Phase III clinical trial for diabetics. Anecdotally, diabetics find it more difficult to lose weight, so his weight loss of 52 points is especially significant.

Disclosure: Long ARNA shares.

Attention: Career Transitioners

It's a touchy subject, but a real one that needs to be dealt with: many in corporate America are being downsized--they're getting laid off. Some have emergency reserves to last them a few months while they land back on their feet. In this tough job market, a few months of unemployment may last a few quarters.

Whichever the case, if cash reserves are insufficient for living expenses, many have to resort to dipping into their qualified retirement savings plans, whether they are 401K's or IRA's. The catch is that if the candidate is under age 59 1/2, the penalty for early withdrawal is 10% under IRS tax codes (an additional 2 1/2% for California residents). These penalties are on top of any income tax events.

However, there is a way to withdraw from qualified accounts without incurring those penalties. It is under IRC Section 72(t). Contact me and we can go over how this tax code may provide you some relief. There are also annuity products out there that offer you bonuses of up to 15%, as well as guarantee you an income for life. In this market environment, they provide tremendous advantages in safety of principal, income, and growth.

If you must...

If you must gamble (and yes, investing in stocks is a gamble, and something I don't recommend to clients since most are unfit investors) my next call is buying water stocks. Living without oil will be a struggle, but we will survive future oil crises. But living without water will lead to death. Not only do we need it to hydrate ourselves, but we also need water for our crops, and almost every product we consume. For instance, It takes thousands of gallons of water just to make one pair of jeans. It obviously takes a lot more water to manufacture autos, semiconductors, toasters, etc. I'm not at liberty to recommend specific stocks (for legal and other reasons), but you can do your own research on that. Just tread carefully, and only invest if you can afford to lose some or all of your investment. Hence, for most people whose net worth is under $5 million, I do recommend applying Missed Fortune strategies developed by Doug Andrew. It's a safe, conservative strategy to provide liquidity, safety of principle, and earn a competitive, tax-advantaged rate of return.