This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Arena Pharma And The Fat Lady's Song

Stocks in this article: ARNAVVUS

Updated with current stock price.

NEW YORK ( TheStreet) -- Last month, Arena Pharmaceuticals (ARNA) received a positive vote from the FDA's Endocrinologic and Metabolic Drugs Advisory Committee for the use of lorcaserin to treat obesity. The company did an admirable job parrying panelists' questions and the FDA's skepticism and earned an 18-to-4 recommendation for approval, with one abstention. On Wednesday, Arena faces its next hurdle: the Prescription Drug User Fee Act (PDUFA) date for lorcaserin, better known as the FDA's approval decision date for the obesity drug.

Lorcaserin might receive final approval this week, but I think a three-month delay or another complete response letter (CRL) is more likely. As I have said in the past, I expect the FDA will require a Risk Evaluation and Mitigation Strategy (REMS) to minimize inappropriate use of the drug and the risk of an unexpected safety debacle. (The sting of repeated obesity drug fiascos -- American Home Products' fenfluramine-phentermine, known as Fen-phen, and Abbott's (ABT) Meridia in the U.S., and Sanofi's (SNY) rimonabant in Europe -- won't go away any time soon.) Ultimately though, I think lorcaserin will be approved for sale in the US (and probably Europe, although a decision from European regulators won't come until early-to-mid 2013).

My advice to lorcaserin bulls would be to cherish the moment but sell the stock. (Some investors are doing just that; Arena shares fell 15% Friday after and another 1% Monday after nearly tripling since the FDA panel.) This is as good as it gets. If you're one of the lucky few that can find shares to borrow, congrats -- you've got a good short.

I doubt lorcaserin will be the mega-blockbuster that bulls expect. History is on my side -- no obesity drug has ever even come close to reaching $1 billion in US sales -- and the company's clinical data contain some worrisome red flags. (Admittedly, I didn't think lorcaserin would be approved until after I read the FDA briefing documents; the comments section will likely overflow with vitriol from those who wrongly think that background disqualifies my opinion.)

My primary concern is the drug's modest effect size. In Arena's Phase III studies, named BLOOM and BLOSSOM, lorcaserin recipients lost only 3.7% and 3.0% of their body weight, respectively, after adjusting for the placebo group (all patients in the study also had intensive dietary counseling). That's not a very big impact, especially given the baseline demographics (patients, roughly 80% of whom were female, weighed 220 lbs on average).

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,577.88 +178.21 1.09%
S&P 500 1,937.85 +33.84 1.78%
NASDAQ 4,411.4590 +95.3850 2.21%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs