Arena Pharma Obesity Drug Passes Critical Safety Test

Updated from 1:19 p.m. EDT

Arena Pharmaceuticals(ARNA Quote - Cramer on ARNA - Stock Picks) said Monday that its obesity drug Lorcaserin passed an important safety hurdle at one year of dosing.

Shares jumped as much as 12% on the news, before retreating along with broader biotech indices. The stock recently was down 10 cents to $6.21.

An independent data safety monitoring board cleared the continuation of Arena's BLOOM phase III trial of Lorcaserin after a comparison of heart valve damage in patients treated with the drug for 12 months didn't find significant differences compared with a control group.

Lorcaserin's safety had been a key issue for investors because the drug has similar characteristics to fen-phen, the diet pill known for potentially fatal heart side effects.

Lorcaserin targets a key area of the brain associated with regulation of food intake and metabolism. The drug targets a serotonin receptor, similar to the fenfluramine component of fen-phen.

Arena's CEO Jack Lief said in a press release that exposure to Lorcaserin for 12 months, even under a conservative interpretation of the literature, would've been enough to see a fenfluramine-like effect on heart valves if there were one.

"The month-12 review of the echocardiographic data significantly adds to our confidence in lorcaserin's cardiovascular safety profile," said Arena's chief medical officer, William Shanahan, in the release.

The two-year BLOOM trial, evaluating a 10 mg dose twice daily, will wrap up in about a year, according to the company. Arena will continue to evaluate echocardiograms at 18 and 24 months.

"Importantly, the company's assumed underlying rate of valvulopathy in an untreated patient population has been confirmed by the DSMB's review, maintaining the integrity of the design of the BLOOM trial for longer-term follow-up," noted Lazard analyst Matt Osborne, who has a buy rating and a $15 price target, in a note to investors Monday.

As the company passes safety checks, investors are also watching for a potential partner for the drug, which Arena discovered internally.

Arena is also conducting two other related studies: the BLOSSOM trial, a one-year study on 10 mg and 20 mg doses of Lorcaserin in obese patients, and the BLOOM-DM on obese patients with type II diabetes.

Patients in those studies will receive echocardiograms at baseline, six months, and at the end of the study to assess heart valve function over time. Those trials, however, won't be monitored by an independent board.

Know What You Own: Arena Pharmaceuticals operates in the healthcare industry, and some of the other stocks in its field include Abbott Laboratories (ABT Quote - Cramer on ABT - Stock Picks), Sanofi-Aventis (SNY Quote - Cramer on SNY - Stock Picks), Merck (MRK Quote - Cramer on MRK - Stock Picks), Eli Lilly (LLY Quote - Cramer on LLY - Stock Picks) and Pfizer (PFE Quote - Cramer on PFE - Stock Picks). These stocks were recently trading at ($52.79, +2.74%), ($35.45, -0.06%), ($41.67, +1.71%), ($48.97, +2.43%) and ($20.72, +0.39%) respectively. For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.