Wednesday, September 24, 2014

Evaluating the Belviq Smoking Cessation Opportunity

First off, I would like to thank those who have found value from my articles I’ve previously published on my blog and Seeking Alpha.  I’m no longer going to use Seeking Alpha as a medium for a few different reasons.  Since Seeking Alpha has made the business decision to not pay to have their content distributed via Yahoo Finance, the page hits have been cut by about 75% in my experience making it not worth the effort.  Secondly, I have so much more freedom to write more creatively and openly than you can on an edited website like Seeking Alpha.  So with that said, if you are offended by curse words and political incorrectness, read no further.

I recently read a new publication that re-enforced my bullishness on Arena Pharmaceuticals' Belviq to take over as a 1st line treatment option for Smoking Cessation.  As I covered in my last blog post, there are several events upcoming that can lead to Belviq becoming a blockbuster drug.  One of those of course is the data on Belviq as a smoking cessation option and the other is the Belviq + phentermine (BelPhen) pilot study data.  I think there are several shots on goal for Belviq to reach a blockbuster within 3 years or so given what we know today about this market and this drug.  I have no idea how Arena’s marketcap is under $1B given these opportunities.  It is a bit ridiculous in my opinion but the market is always right so what do I know.  So as an investor, you can use the weakness to add to a position, sell out for a loss or just sit back and wait for the story to play out. 

One of the reasons ARNA is valued as it is, is due to the fact that Wall Street has attached the three obesity drug related biotechs together.  Many paired trades are out there for these companies with professionals being long or short each equity in various combinations.  It limits the spread between valuations and with the very slow uptick for obesity drugs, all of these companies have felt the pressure.  It is a bit unfair but that is a big part of why ARNA has floundered around 52-week lows.  There is very little premium put in Arena as being an R&D company with novel drugs vs. Vivus and Orexigen which have glued together a couple of generics.  Generics that have a host of side effects and whose combination use has never really taken off in the market place.

These branded combination generics, Qsymia and Contrave, are really a scam to the American public and physician community in my personal opinion.  I mean seriously.  Weight loss specialists have been combining phentermine with topirimate for decades so why in the world would they switch to a fixed dose, branded drug that costs multiples more?  Contrave has inherited the block box warning of bupropion and it will have the same generic pressures as Qsymia.  Vivus and Orexigen will be spending hundreds of millions of dollars in post-marketing trials in the HOPES that physicians will be duped to prescribe their branded drugs rather than just writing two scripts for combination therapy.  

That is not a business model that I found compelling to invest in.  It sounds like a great way to lose your money if you ask me.  Vivus is lucky they have an ED drug with an improved label and that should be their focus as a company.  Who knows what is going to happen with Orexigen.  Maybe Takeda can convince primary care physicians that Contrave is a good idea but I seriously can’t see it being more than a 3rd line option.  Maybe if they were able to get interim cardiovascular data in the label, it could have offset the black box but they are a bit fucked now in my opinion.  But again, I’ve been wrong for years so I could be wrong again.

I know I have digressed but the reason was to discuss why Arena is valued at $900M being tied at the hip, at least by Wall Street, to two “peers” who sell weight loss drugs.  Rather, it should be valued based on future expectations of its NOVEL drug that is a SINGLE COMPOUND with multiple market opportunities.  It will be combined regularly with phentermine as I discussed in my last article.  That efficacy is twice as good as the competition and 10%+ weight loss in 12-weeks is going to cause a great demand from consumers, once they become aware of it.  So outside of chronic weight management and BelPhen, how does Belviq become differentiated in the market?  Wall Street needs to recognize its unique position as a novel drug with multiple uses.  This is where the upcoming Phase 2 smoking cessation is key in my opinion.

In my BelPhen article, I included data from pre-clinical studies that demonstrate the synergy between Belviq with phentermine.  In previous articles, I included links to other pre-clinical studies that showed great promise for Belviq’s ability to be used for smoking cessation.  This opportunity is understood by many scientists, researchers and even the National Institute of Drug Addiction (NIDA.)  I spoke with NIDA representatives 2 ½ years ago and they were particularly excited about the potential for Belviq as an anti-addiction drug, not just weight loss.

As I alluded to in the introduction, we now have yet another pre-clinical study that was recently published that underscores the opportunity here.  This study was published in the Behavioral Pharmacology Journal and is entitled: Examination of the effects of varenicline, bupropion, lorcaserin, or naltrexone on responding for conditioned reinforcement in nicotine-exposed rats.  You can purchase the article here, assuming you don’t have that publication on your coffee table. What is cool about this study is it was a head-to-head comparison between varenicline (Chantix,) lorcaserin (Belviq,) naltrexone and bupropion (Wellbutrin/Zyban and a key ingredient for Contrave) so it is a great way to gauge their effectiveness in a controlled trial with the same parameters.  Animal models for drug addictions are very representative of what you ultimately see in human testing because it is the same primitive pathways that tend to be involved.

Obviously I can’t share too much content from this publication, I would encourage readers to purchase it,) but I’m sure the authors won’t mind if I shares this quote as it pertains to their findings for lorcaserin’s potential to be used as a smoking cessation treatment:  

"Presently, lorcaserin is only marketed as an aid for weight loss, and to
date, has not been examined formally as a treatment for smoking cessation. Given that both food and drug reward-directed motivation can be influenced by similar neuronal circuitry (Berridge, 1996; Berthoud and Morrison, 2008), it is possible that this drug decreases the motivation for both food and drug intake through a common mechanism of blunting the motivating properties of reward-associated cues (Higgins et al., 2013b). It is also notable that one of the unwanted side-effects of smoking cessation is weight gain (Williamson et al., 1991). Thus, the use of this drug as an appetite suppressant in
abstaining smokers may serve the added benefit of attenuating reactivity to smoking-associated cues (Higgins et al., 2013b). These two beneficial effects could encourage the individual as he or she works toward attaining a healthier lifestyle."

In their tests, based on a review of the included charts, varenicline (Chantix) reduced self-administration of nicotine by approximately 40%, lorcaserin reduced self-administration by 43%, demonstrating similar efficacy.  Clearly you need human, clinical data, to really start having prescribers consider Belviq as an off-label option for smoking cessation.  Eisai will need Phase 3 trials in 2015/1016 but you could see a smoking label in 2017, assuming the studies are positive.  

The Smoking Cessation Market

The Smoking Cessation drug market is about $2.5B globally based on estimates I’ve read.  This is considered a highly unmet medical need given the pretty shitty options out there.  Just read Chantix’s label here.  When this drug was approved in 2006, Pfizer had high-hopes for it and rightfully so given the poor number of options for treatment.  Chantix had sales of $883M in its first full year on the market, on pace to be a blockbuster in Year 2 until OOPS, a black box for psychiatric risk crushed those chances.  It has been linked to over 500 suicides yet still is doing over $600M a year.  It just shows you how dismal the options are for smoking cessation.

What would the smoking cessation market be if there was a drug that was as effective as Chantix, had no black box, had far better tolerability AND resulted in weight loss or at least weight neutrality?  Surely it could manage over $1B a year which Chantix would have done in year 2 without the black box?    There are approximately 40M smokers in the United States alone.  It is estimated that 70% of them actually want to quit, that is 28M Americans.  The numero uno reason that most of those 28M people have for not trying to quit smoking?  FEAR OF WEIGHT GAIN.  

I think it is a pretty logical hypothesis that if the Phase 2 trials for Belviq as a smoking cessation aid meet end-points, it will repeat that success in Phase 3 and earn a smoking label.  There should be growing off-label use if the Phase 2 trials are positive and those results are widely publicized.  It will also be a great  way to go after a smoking cessation label in other territories as a way to gain approval in markets who are hesitant to approve weight loss drugs.  You will then have patients who undoubtedly then take it for weight loss off-label.  Having Belviq known to be useful as a smoking cessation drug will perhaps finally help differentiate it as a novel drug with multiple uses and show that it shouldn’t be compared to the generic combination drugs it is grouped in with today.  

Valuing a Smoking Cessation Opportunity

If the global smoking market is $2.5B today with pretty shitty options out there, then what is the global market for a drug that has clear differentiation through weight loss/neutrality in the label without a black box and a great tolerability profile?  Certainly it would expand that market.  It would also likely take a significant amount of market share from the competition.  I threw out some estimates for smoking cessation revenue if Belviq can get that label in 2017.  This is just for smoking cessation in the US.  Of course you have revenue for the current label and hopefully broad use of the potent BelPhen combination.  But let’s pretend this was solely a drug for smoking cessation, what would today’s intrinsic value be for that revenue stream?  

Now this is just for illustration purposes and there are dozens of variables in play including patent timelines, future dilution, increasing operating costs, etc. but the purpose is to show that the unique and novel compound Belviq is worth far more than is currently reflected in the stock price of ARNA.  If Pfizer can make Chantix still sell $600M with that label, they could sell $2B a year of Belviq for smoking cessation.  Eisai is no Pfizer of course but the point is that there is huge worldwide demand for better smoking cessation pharmacotherapy options.

So here it is you have ARNA with $900M marketcap and it cost more than that just to get Belviq to market.  You have Big Pharma that has paid billions for companies for drugs that never panned out.  Now looking ahead, you have a novel compound in Belviq that could be used to treat numerous addictions including nicotine, cocaine, alcohol & meth.  A combination opportunity with phentermine that could create a new fen-phen craze with BelPhen and its 12% 12-week weight loss average.  A best in-class chronic weight management drug for a market that is really in its infancy for obesity being treated as a disease.  A drug that appears to be more effective in treating diabetes than the $4B a year Januvia franchise and which can also be used as an effective pre-diabetes drug.  Yet, even with all of this future potential, Wall Street basically says that Belviq will never really be more than a minor drug with limited market potential.  There are almost 50 blockbuster drugs and 100 that do over $500M a year but Belviq is valued like it has very little chance of making it on that list.  It seems like it has a pretty good shot to me.  Given the market opportunity for weight management + diabetes + smoking cessation is by far larger than any drug currently available, it doesn’t seem that it becoming a $1B+ asset in the coming years is that big of a stretch?

If I’m in Merck or Pfizer’s executive boardroom, I’d be doing all I could to acquire Arena even with the partnership with Eisai in place.  Perhaps they have tried in the past or not bothered because they don’t see value in lorcaserin’s potential?  I personally would prefer for Arena just remain independent and see multiple new novel drugs through Phase 2 and continue to partner them while Belviq becomes a franchise in its own right.  But I have a lot of patience and a long-term investment horizon.  Others would like a buyout tomorrow.  Regardless, the upcoming BelPhen + Smoking data is key for everyone.  

Once these data points are out, perhaps ARNA will show it is a differentiated company with a unique set of market opportunities in the coming years.  A $4 stock price and less than $900M market cap is pretty fucking crazy risk to reward value play and not representative at all of the opportunity here.  Does it suck that ARNA is 70% off post-approval highs?  Yep.  Does that mean that the market opportunity is any less?  No, in fact it is really the opposite.  I would argue that with upcoming BelPhen and smoking data, the opportunity is far greater in 3-5 years from now than it was post-approval.  Buying ARNA at today's price is far less risky in my opinion than buying this stock pre-approval, and certainly at post-approvals highs.  Buying low and selling high is much better than buying high and selling low like many retail investors have done with this stock.  I think those who are investing at these lows, are in a great position for a 3-5 year hold with multiples of returns.  

Tuesday, September 16, 2014

Arena Pharmaceuticals - Belviq + Phentermine Combination A Game-Changer

It has been a long-time since I posted on this blog so I thought I'd take this opportunity to provide an update on the progess of the Belviq + Phentermine opportunity.  In the Seeking Alpha article I published last week for Arena Pharmaceuticals (ARNA,) I listed the key catalysts for their lead drug Belviq to become a blockbuster.  A key component of the overall thesis is the potential for Belviq to be used in combination with phentermine to create a new “Bel-Phen” therapy that is as effective as the fen-phen phenomenon of the mid 1990’s but without the associated heart valve problems.  On September 12th at the American Society of Bariatric Physician’s Symposium in Austin, TX, a medical weight loss specialist in Missiouri, Dr. Robert Huster, delivered a Poster Session on his results using this combination in his practice.  In this article, I’ll discuss why Dr. Huster’s results should foreshadow what investors should expect from the release of the clinical trial to test these two drugs together.

Arena Pharmaceuticals was founded in 1997, the same year that fenflurimine was pulled from the market, the “fen” in the potent “fen-phen” weight loss therapy.  At the peak of the fen-phen craze, between 16-18M scripts a year of the combination was being filled at its peak.  Arena’s specialty is creating highly-selective GPRC drugs and their lead compound lorcaserin (Belviq,) is the first highly selective 5-HT2c agonist available.     A “safe” replacement for fenflurimine that was selective to the 5-HT2c receptor in the brain, associated with satiety and a reduction of cravings, could create a combination therapy that is as efficacious as fen-phen but without impacting the 5-HT2b receptors in heart valves and resulting in valvulopathy or pulmonary arterial hypertension (PPH.)  This market possibility was the key component of my original investment thesis for Arena.  Although this isn’t the only reason while I remain an ARNA-bull, it is the catalyst by which a parabolic growth of prescriptions could occur.

Obesity specialists have long recognized that combination therapy is the most effective solution for treating this complex disease.  In the investor world, the market has long compared the efficacy of Vivus’ Qsymia (fixed-dose topirimate and phentermine combination) compared to the novel, single-agent Belviq.  With Qsymia, patients could expect a 52-week weight loss of 6.7% at the recommended mid-dose or 8.9% for the high-dose, which almost no patients progress to due to the tolerability of this dosage.  Belviq on the other hand, results in a mean 5.8% 52-week weight loss.  As these are pooled results, it is important to note that there are clearly responders and non-responders to each drug and why the FDA recommends that a physician track a patient’s progress and in the case of Belviq, discontinue the drug after 12-weeks if they haven’t achieved 5% weight loss.

Given the average efficacy for Belivq is described as modest, many physicians are reluctant to prescribe weight loss medication.  The weight loss also isn’t eye-popping enough to result in mass consumer demand.  The holy grail of average weight loss that physicians want to see is 10%.  That is obviously not a moderate amount of weight loss.  Even though the literature is clear that a 5-10% reduction in weight is clinically meaningful, many physicians are still reluctant.  This is why the results of the Belviq + phentermine combination therapy is so important to ignite the weight loss drug market.  If Bel-Phen can provide similar efficacy as Fen-Phen, then there is your vanity market and there is no longer a conversation of modest efficacy.  In a segment on the Today show discussing combination weight loss therapy, a patient was interviewed who took Fen-Phen, had great success, and then describes her experience with the topirimate-phentermine combination which is now marketed by Vivus (VVUS) as Qsymia.  Dr. Louis Aronne of Weill-Cornell Medical College and a though-leader in the medical management of obesity is interviewed in this segment states that it is “very clear you have to use the right medications together,” for treating obesity.

As the author of the linked article states:  “The phen side of fen-phen is still available, but to be a real diet aid, it needs a dance partner. For one thing, the use of phentermine, a chemical cousin of amphetamine and a controlled substance, is approved only for a few weeks. It does make hunger fade, but over time, weight loss tends to peter out. What fen did was keep phen going in an exciting quickstep—a Fred Astaire sweeping his Ginger Rogers to magical heights. Ever since fenfluramine was taken off the market, physicians have been looking for a replacement.

Even though phentermine isn’t as in-vogue as it was in the mid 90’s, it still is written about 150,000 times per week, less than half the volume it did as part of the fen-phen combination.  Most of these prescriptions come out of weight loss clinics.  If Bel-Phen is shown to have the clinical efficacy of fen-phen without any new severe adverse events, it could re-invigorate the weight loss clinic market.  This is a consumer-driven market and not one created by company sales & marketing teams.

Foreshadowing the Clinical Outcomes
Eisai Pharmaceuticals, Arena’s marketing partner, has completed a Phase II “pilot” study to test the safety of using Belviq combined with phentermine.  Arena has guided that results will be out towards the end of 2014.  It is important to call-out that the FDA did not require any echocardiograms during this trial.  In the pivotal trials for Belviq, over 20,000 echocardiograms were conducted to rule out valvulopathy as much as statistically possible for Belviq.  The ongoing cardiovascular outcomes trial will provide the data required to completely rule out an increase in cardiovascular risk and hopefully, show a reduction in risk instead.  

This initial Bel-Phen study is intended to test safety of the combination with efficacy as a secondary measure.  It consists of three 75-patient arms of Belviq + placebo, Belviq + 15mg phentermine BID and Belviq + 15mg phentermine QD.   Arena had guided to releasing the results of this study prior to the end of this calendar year.  Based on the outcomes, then Eisai and Arena will consult with the FDA on if this will be enough to request a label change or if a second study will be required.

So what should investors expect with this study?  Will there be a synergetic effect with using Belviq and phentermine in combination or will investors be sorely disappointed?  As mentioned in my introduction, there was a small independent study presented at last week’s American Society of Bariatric Physicians Symposium that detailed early results of using this combination in practice.  Dr. Robert Huster and Dr. Louis Aronne’s study only consisted of a total of 22 patients who completed but demonstrated an amazing 11.8% average 12-week weight loss.  In addition to the impressive weight loss, no significant side effects were observed.  I should note that Dr. Arrone's university is also listed as a site for the formal Eisai study.

Dr. Huster and Aronne’s treatment of 1 Belviq 10mg per day and 2 15mg tablets of phentermine per day is not consistent with the trial arms of Eisai’s study, but could foreshadow the efficacy that should be seen in that study.  We should see the trial arm in Eisai’s study consisting of 2 Belviq 10mg with 2 15mg phentermine per day show at least 12% 12-week weight loss.  That is over twice as effective as Belviq’s 52-week mean weight loss and almost twice as good as Qsymia mid-dose 52-week loss, in just 12-weeks for Bel-Phen.  If the Eisai trial is consistent with the results from this small study and demonstrates and expected AE profile, then this could be the beginning of Bel-Phen becoming a reality.  

The synergistic effect of this combination was seen in pre-clinical animal tests conducted by Arena as noted in the Arena patent covering this combination therapy.  Given that animals and humans have the same pathways in play for food cravings and satiety, the Bel-Phen results seen by Dr. Huster and Dr. Aronne are to be expected and consistent or better than results seen with the fen-phen combination.  An image of the results of the pre-clinical Belviq + phentermine studies is show below and the Compound B listed is the same chemical formulation as lorcaserin:  

(click to enlarge)
Interestingly enough, Arena has additional patents covering other variations of lorcaserin as seen in this patent application from 2005.  This updated compound appears to even more selective at the 5-HT2c receptor than Belviq is and the results of combining it with phentermine are even more compelling in this graphic.  Will Arena move this compound forward in the years ahead as Belviq gets closer to its 2026 patent expiration?

(click to enlarge)
In summary, I don’t think it is unreasonable to hypothesize that tens of millions of people would want to try Bel-Phen if they found that it is safe and can result in 12% or more in weight loss over 12-weeks.  What you can’t anticipate is when will the public become aware there is a safe alternative to fen-phen?  What is the mass-media event that brings that awareness?  It could be a segment on national TV, article in a prominent magazine or just via social media.  What I can say with confidence is that word spreads much faster in today’s social-driven world vs. 1996.  It is the consumer that will create the demand for this combination therapy and when that demand comes, nobody knows.  The current valuation of Arena in no way builds in much chance of a Bel-Phen craze.  Similar peak scripts to fen-phen would generate $1.8B-$2B in net annual sales for Belviq and earnings over $2 a share for Arena.  It makes today’s $4 share price for Arena a high risk / high reward value proposition if you believe that the public will want to try a drug to shed 12% of their weight in just 12 weeks.

Tuesday, January 8, 2013

Arena Breaking Out Ahead Of European Approval

Arena Pharmaceutical (ARNA) investors have been anxiously awaiting the launch of their lead drug BELVIQ which appears only to be weeks away after the DEA recommended a Schedule IV drug classification on December 18th.  On January 9th, Arenas CEO, Jack Lief, will give a presentation at the J.P. Morgan Healthcare Conference where investors are hopeful for an update on BELVIQs launch and any updates regarding their application for marketing authorization in Europe.  Given Arenas jump of almost 10% on January 8th, the market may be starting to anticipate that EMA approval is becoming more likely.

Arena closed above $10 on January 8th for the first time since July, shortly after receiving approval for BELVIQ -- the first new novel weight loss drug approved by the FDA in the last 13 years.  More importantly, it is the first drug ever approved for this indication that is free of unpleasant or dangerous side effects.  It could be the first option ever for endocrinologists, cardiologists, obesity specialists and primary care physicians to prescribe that gives a patient a very good chance to lose an average of 11% (if they are a drug responder,) lower HbA1c by -.9 (better than most Type II diabetes drugs,) while both lowering blood pressure and heart rate.  This is the type of drug profile and approved label that leads to a chronic therapy becoming a major blockbuster.

With two-thirds of America overweight or obese, there are plenty of potential patients in the US to make BELVIQ a blockbuster.  European approval would almost double that target market and with Vivus’ (VVUS) Qsymia rejected for European use, BELVIQ would be the only viable options for the medical management of obesity.  Under centralized drug reviews in Europe, the Committee for Medicinal Products for Human Use (CHMP) will provide Arena with an assessment of their review of BELVIQ at day 180 of the review process.   Since Arena responded to the CHMPs 120-day list of questions before the end of October then by regulation, the CHMP would have provided Arena with their 180-day assessment in December.  Since Arena has not announced that an Oral hearing is required at next weeks meeting of the CHMP, then it is reasonable to assume that the CHMP may in fact not have any outstanding questions and there is no oral hearing required.  If that is in fact true, then it would indicate BELVIQ EMA approval is becoming more likelyand far sooner than many believe.  It is likely the CHMP will recommend approval for BELVIQ at next weeks meeting if there are no outstanding concerns, and the meeting minutes could confirm that on Friday, January 18thwhich just happens to be right before options expiration.

Arenas breakout on January 8th was confirmed with volume and sets up ARNA for a run to the next major resistance area to $12 and ARNA could soon fill the gap to $11 left from July 18th, 2012.  Positive comments from Arena as it pertains to the CHMP review for BELVIQ at the J.P. Morgan conference could be enough fuel to lead that charge to fill the gap to $11 and set-up a very interesting scenario for January 2013 options expiration if the CHMP follows with a recommendation for EMA approval next week.
(click to enlarge)

With the thumbs-up from the CHMP, Arena is likely to begin finalizing who their marketing partner will be for Europe.  As Arena did with Ildong for South Korea and Eisai for most of the Americas, they will want a partner who will market BELVIQ as a chronic therapy for improving overall cardio-metabolic health and not just for cosmetic purposes.  This was affirmed by Craig Audet, Arenas SVP of Commercial Operations, in a recent Bloomberg article: “Another thing were really looking for is someone who looks at BELVIQ for medical management of obesity, and not just as a weight-loss drug,” Audet said in an interview. “We dont want someone marketing this as a cosmetic drug.”  Jack Lief also provided another clue of the next major market to be partneredChina.  “Lief said the biggest market outside the U.S. for the drug is China, and the company is looking for partners there as well.”

This strategy for signing marketing partners who understand the overall health improvements brought about by BELVIQ is important for building long-term value.  There is a major difference for drugs that are prescribed by endocrinologists and cardiologists and those marketed for cosmetic purposes.  FenPhen (fenflurimine + phentermine) was for the cosmetic market, it wasn't written by your cardiologistFenPhen was written 18M times in its peak year.  Redux had the fastest drug launch everwritten 53K a week just 3-mo post-launch for the cosmetic market.  This market has probably doubled over the last 15 years since fenflurimine was pulled.  BELVIQ does not equal fenflurimine for many reasons.  Of course the primary way it is different is because it is selective in the receptor it targets and is more effective than fenflurimine was as a single agent.  The hypothesis of course is that BELVIQ will be as good, if not better, than fenflurimine was when combined with phentermine (without the risk of valvulopathy)  -  BelPhen, amagic pillto lose 15% weight.  This was my original ARNA investment thesis to begin with. However, BELVIQ is a great drug by itself and should be marketed that way.  It has basically no risk associated with trying it and for almost have the people who do try it to see if you respond to the drug; if you do, you will lose an average of 11% even without combining with phentermine.  As a single mono-therapy that can help a patient lose weight, reduce HbA1c by -.9 and improve blood pressure, reduce heart rate, lipids and waist circumferenceBELVIQ becomes a drug that can confidently and liberally prescribed by most everyone.

This is why it is important to have a marketing partner that recognizes the holistic benefit of BELVIQ for chronic weight management and not just cosmetic benefits.  It is a drug for cardio-metabolic health first and foremost.  This is a market more important and much larger than the statin market.  A market with really no competition and certainly no first line therapy that exists today.  It is the largest unmet medical need in the world and there has never been a safe, tolerable and effective choice for prescribers. It should not be promoted as a cosmetic drug (at least not by the marketing partners.)  Cosmetic use will come organically.  It does not need to be promoted that way, just like FenPhen was only promoted through the media and weight loss clinics.

Qsymias Abysmal Failure

Earlier this week, VVUS jumped after reports stating that prescriptions rose 68% for the four weeks ending December 21st after the launch of their marketing program giving the first two-weeks of the drug away for free (titration period) – a total of almost 13,000 prescriptions compared to less than 8,000 for the four weeks ending November 23rdThis means prescriptions grew from an average of 2,000 a week to just 3,250 a week a full 3 months after launch!  At an average script value of $150 that is less than $500K in sales per week and indicates that Vivus sold less than $5M of the drug since its launch in Septemberbut a small fraction of the estimates for 2012 Qsymia sales and certainly not close to the rate it needs to be at to justify a $1.5B valuation.  With Vivusquarterly operating costs likely approaching $50M a quarter, Vivus is burning through their cash at an unprecedented rate.  For those who have read my perspective on Qsymia in the past, this should come as no surprise.  Frankly, sales have been worse than I even imagined.  Because this drug raises heart rate (thanks to phentermine,) and has other unpleasant side effects such as tingling extremities and cognitive impact - it doesn't have the profile for a first line therapy.  When you add in the risk of birth defects for the most prominent portion of the target market (requiring pregnancy tests and double birth control,) the pain of titrating doses, the limited distribution and the training prescribers have to complete before they can even prescribe it -- you have the makings of a complete disaster.  I maintain that Qsymia will be shown to not be a viable drug long term given the costs of the required post-marketing studies over the next 5 years and pending competition from both BELVIQ and BelPhen.

The biggest risk with investing in ARNA (for me,) was would the FDA approve this drug given the history of this class of medicine and particularly because of the concern over valvulopathyI'm not concerned at all that BELVIQ is going to sell well given its unique mix of safety, tolerability and efficacy -- plus the potential for BelPhen.  It may take longer than I'd like but I think it sells and therefore I continue to hold my overweight position (no pun intended.)  I look forward to a potential recommendation by the CHMP next week for BELVIQ approval in the EU and the US-marketing to begin in February.

Wednesday, December 19, 2012

The Upcoming Arena Battle and Short-term Catalysts

Today Arena Pharmaceuticals (ARNA) finally received the long-anticipated Schedule IV designation recommendation from the DEA.  This is the 1st major step to be completed prior to the marketing and distribution of BELVIQ in the US.  There will now be a 30-day comment period for the public to provide their input followed by DEA formal scheduling, which generally takes 15-45 days to complete.  There will then likely be a 30-day delay in “effective date” to comply with section 553 of the Administrative Practice Act.  So with DEA scheduling now complete, what can investors expect over the next 90 days as BELVIQ finally approaches launch?

I have corrected my previous article and put it up on Seeking Alpha for wider distribution:

Good investing.