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Arena jumps on obesity drug approval

by Ben Fidler | Published June 27, 2012 at 4:30 PM

Arena Pharmaceuticals Inc. may have just branded itself as a prime takeover target now that it has claimed victory in the race to produce the first approved obesity drug in 13 years.

The U.S. Food and Drug Administration approved San Diego-based Arena's weight-loss drug Belviq on Wednesday, June 27, following the recommendation of a May panel that voted 18-4, with one abstention, in its favor.

The drug is approved for use in obese adults -- those with a body mass index of 30 or greater -- or adults with a BMI of 27 or greater who have at least one weight-related condition, such as hypertension, Type-2 diabetes, or high cholesterol, according to the FDA.

The drug is to be used as an adjunct to a reduced-calorie diet and exercise regimen. Arena is partnering with Woodcliff Lake, N.J.-based Eisai Inc. on Belviq, whose chemical name is lorcaserin.

Arena will manufacture and supply the product from its facility in Switzerland, while Eisai will market and distribute the product in the U.S., Canada, Mexico and Brazil. Arena owns the rights to Belviq outside of North and South America, including the European Union and Asia.

The victory is no small feat for Arena. The drug was initially rejected in 2010 due to safety issues. But Arena's perseverance has paid off, as it has appeased the FDA's concerns and now owns the rights to the first approved drug for obesity since Roche Holding AG's Xenical won FDA clearance in 1999.

The drug has the potential to be a blockbuster -- which gives Arena instant appeal as a takeout target for Big Pharma -- given the expanding market and the resulting appetite for weight-loss drugs. According to data from the Centers for Disease Control and Prevention, more than one-third of U.S. adults are obese, a "dramatic" increase over the past 20 years.

"Obesity threatens the overall well being of patients and is a major public health concern," said Janet Woodcock, director of the FDA's Center for Drug Evaluation and Research, in a statement. "The approval of this drug, used responsibly in combination with a healthy diet and lifestyle, provides a treatment option for Americans who are obese or are overweight and have at least one weight-related comorbid condition."

Arena tested Belviq in roughly 8,000 patients with and without Type-2 diabetes for between 52 and 104 weeks. In Phase 3 trials, about 47% of patients without Type-2 diabetes lost at least 5% of their body weight, while 38% of patients with Type-2 diabetes showed such results, according to the FDA's statement.

Jefferies & Co.'s Thomas Wei has estimated that lorcaserin could eventually bring in more than $1.5 billion in annual sales, according to a research note. Arena declined to discuss the pricing of the drug on a Wednesday conference call.

The market has reflected investors' interest in such a drug. Arena is one of three companies developing a weight-loss/weight management pill. The other two are Vivus Inc. and Orexigen Therapeutics Inc.

Vivus appeared to have the inside track to becoming the first to bring its drug, Qnexa, to market when an FDA panel voted 20-2 in its favor in late February.

Vivus' stock price promptly exploded, going from $10.55 per share on Feb. 21 to $18.73 per share two days later. But Vivus was dealt a temporary setback in April when the FDA delayed its decision on Qnexa by three months and requested more data. A decision on Qnexa is now expected on July 17.

Before the panel's vote on Vivus' Qnexa, Arena's stock was worth $1.80 per share. But trading in the stock spiked considerably once the results were released, even as the price of the stock remained at less than $2.

Once the panel vote for Belviq was released May 9, the stock nearly doubled from $3.66 per share to $6.36 per share. It climbed as high as $11.68 per share on June 21 before dipping back down under $9.

Trading was halted minutes before the FDA officially approved the drug Wednesday with the stock trading at $8.85.

It immediately jumped more than 30% and traded at $11.79 per share in the early afternoon.

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