Another Bear Roars at Arena (ARNA); Says Numbers, Potential Overblown

June 25, 2012 8:12 AM EDT
In addition to a downgrade at BMO Capital earlier, Arena Pharmaceuticals (Nasdaq: ARNA) shares are lower as another bear is peeking out of the woodwork.

On Monday, Nathan Sadeghi-Nejad penned an article suggesting Arena is likely to get approval in the U.S. for its proposed weight-loss drug lorcaserin, but it might not actually be the blockbuster drug many are thinking. Sadeghi-Nejad noted a lack of large effect size, with recent studies showing patients lost from 3 percent to 3.7 percent of body weight.

No weight-loss drug in history has come close to $1 billion in annual U.S. sales, writer pointed out.

During Arena's BLOOM trial, 23 percent of patients lost more than 10 percent of baseline body weight, compared to 8 percent in a placebo. 43 percent of patents enrolled in the trials dropped out after one year, with 25 percent dropping in the second year.

The author thinks Vivus' (Nasdaq: VVUS) Qnexa will garner more market share. Patients lost from 3.5 percent to 9.3 percent of baseline body weight (Vivus used three dosage levels).

With lorcaserin, Arena is only getting about one-third the revs. With $1.2 billion in annual U.S. sales (above peak sales of Roche's (OTCBB: RHHBY) Orlistat), Arena would draw about $400 million per year. This comes amid strong competition from Qnexa (as well as Orexigen (Nasdaq: OREX), which is looking for approval of Contrave).

Sadeghi-Nejad made another great point: patients will at some point hit a plateau and mull whether taking the drug will continue to have benefits. A 220-lb woman losing 10 percent of baseline body weight still tips the scales at 200 pounds, not very encouraging in many respects.

Shares of Arena are down 5.4 percent in early trading Monday.

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