Friday, September 17, 2010

Lorqess, Thumbs Down

The Arena Pharmaceuticals and Lorqess story ended badly yesterday. The FDA review Panel said "no" in a 9-5 vote. While the FDA does not always follow its Panel's recommendations, it generally does. Unless Arena can pull off a bit of mouth magic, Lorqess will not be approved for use in the United States. The after hours share price plummeted to $2.15, a mighty fall indeed. Such high hopes were dashed like a ship on a reef.

The issue for which Arena could not present a persuasive explanation was rat mammary tumors. Along the road to the 16th, the rat mammary boondoggle was never even raised. The shock of this revelation, which occurred when the Panel's notes were released on the 14th, sent the share price to the $3.86 level by the time of the trading halt. Arena's failure to recognize and to disclose this mammary matter cost the company dearly yesterday and may indeed cost more later. Shareholders are not fond of such omissions.

Arena is holding a conference call in less than 2 hours, AM7 eastern. Damage control to this point has been nil. The Arena website has no information regarding the Panel's negative decision. More important is the fact that the company has not offered, yet, an aggressive plan of action and reconstitution. As a side note, the web site does not mention the word, "Lorqess". UPDATE YOUR WEBSITE NOW. Shareholders need an "good" conference call.

To be honest, the rat mammary dust up is likely just that, a dust up. Rats are not people and it is not unusual for a pharmaceutical agent to affect rats and humans differently. In addition, the rats received seven times the dosage of lorcaserin based on body weight than the recommended human dose. Seven times. Give a rat seven times the proper dose of any drug and the rat will likely get sick. Umm, what would it be like to take 280 mg of pravastatin a day rather than 40 mg?

Arena should have been better prepared for what amounts to a nonsensical argument. For example, all the subjects, male and female, should have been subjected to breast exams and mammagrams during the study period. If Arena could have shown such data, the Panel would have been impressed by the lack of any mammary tumors AND Arena's recognition of a potential issue.

Don't look back is the order of the day. Arena needs to take on a positive attitude and rectify the situation. The company has 4 weeks before the real game, the FDA meeting. Then, all the marbles will be on the table; win, lose or draw. Arena has time to put together more mammary information. Query, can all of the test subjects hurry up and get examined and tested? Can Lorqess be approved with certain restrictions, periodic breast or cardiac evaluations, for example? Keep in mind that Lorqess was effective and safe, excepting the mammary morass. The predictable neuro-psych stuff amounted to acceptable drug side effects.

Arena, buy, sell or hold. Umm, for the still holders, who have lost their shirts, buy more and dollar average might be the way to go. Look at Vivus. When Qnexa preceded Lorqess to the chopping block, the share price crashed to the $4's and now is in the $6's, a 50% uptick. With a current share price of $2.15 and likely short term churning, a quick in and out day trade will likely yield some profit as well. A buy and long term hold philosophy requires GREAT faith, but miracles do happen. Right? Do not count Lorqess out. Considering the medical NEED for weight loss drugs, the FDA may have its own, unique viewpoint.

Orexigen (OREX), the third of the triad companies going for the fat market with Contrave, popped nicely with the Arena news. Remember, ARNA jumped equally well when Vivus ate dirt in July. OREX reached $6.86 and settled to the mid $6.40's at the close of extended hours. For those, who bought OREX as a hedge, sweeeet. Some think Contrave will fail to get the Panel's thumbs up in its October roast and that the share price jump was unwarranted . Going in, Contrave has more issues of safety than did Lorqess. But that was before the mammaries. Overall, OREX has a lot of life, and will make an interesting story in its own right.

Alright, the conference is in a little more than an hour. Hope springs eternal and it is this way. And so it goes.

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