Arena Shares Boom on FDA Approval of Obesity Drug

6/27/12Follow @xconomy

Arena Pharmaceuticals has faced long odds in its quest to win FDA approval for a new obesity drug, but it overcome the obstacles today.

The San Diego-based biotech company (NASDAQ: ARNA) and its partner Eisai Pharmaceuticals of Japan won clearance from the FDA to start selling lorcaserin (Belviq) as a treatment for obesity in addition to diet and exercise.

Shares in Arena have been surging since last month when it won an FDA advisory panel recommendation for the drug, but the FDA’s green light still surprised many investors who expected the agency to hold up the drug application by asking for more information from the company. Arena stock climbed 28 percent today after the news to close at $11.37 a share, giving it a market capitalization of more than $2 billion. Arena’s good news also lifted the shares of its competitors, Orexigen Therapeutics (NASDAQ: OREX) and Vivus (NASDAQ: VVUS), who are hopeful the FDA has shown a new willingness to allow new weight loss drugs on the market.

Obesity is considered to be one of the biggest potential pharmaceutical markets ever, as an estimated two-thirds of people in the U.S. are overweight or obese. But the new Arena product only showed a modest ability to help people lose weight compared with a placebo, and the FDA is making clear it isn’t for everybody. The new product is cleared for people who are technically considered obese, with a Body Mass Index (BMI) of 30 or more, as well as for overweight people with a BMI of 27 and another obesity-related illness like Type 2 diabetes. A man who’s 6 feet tall has to weigh about 221 pounds to be considered obese, with a Body Mass Index of 30.

Given how many people there are in the U.S. who are overweight and would like to lose a few pounds, but who aren’t technically obese, regulators signaled they will keep a close eye on whether it will be abused. The FDA has also recommended that the U.S. Drug Enforcement Administration classify the new compound as a scheduled drug, to help prevent abuse.

Those restrictions will make it hard for analysts to size up how many people will end up using the drug, and how big of a seller it will become. The company didn’t reveal the price of the new drug in a statement today.

“The FDA approval of Belviq is an important development for patients who struggle with obesity or are overweight with comorbidities and need help with chronic weight management beyond diet and exercise,” said Jack Lief, Arena’s CEO, in a statement.

Arena was turned down in a previous bid for FDA approval in 2010, after the FDA said lorcaserin offered “marginal” effectiveness in clinical trials, and because studies in rats showed that extreme high doses of the drug were linked to higher rates of cancer. Arena worked to allay those concerns over the past couple years.

The company’s application was built on a pair of clinical trials that enrolled more than 7,000 people. The major finding of one of those studies, called Bloom, was that patients lost an average of 5.8 percent of their body weight on the drug, compared with 2.2 percent body weight loss in the placebo group. Headache, dizziness, fatigue, nausea, dry mouth, and constipation were the most common side effects reported in the company’s trials.

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