I finally got a chance to speak with Arena Pharmaceuticals CEO Jack Lief about the company’s tough times since it announced clinical trial results of its obesity drug last month. The bad news culminated last week with the announcement that Arena would layoff nearly a third of its workforce.
On March 30, the company announced good, but not great, Phase 3 trial results for the drug, called lorcaserin. The drug got high marks for safety, but only average for weight loss. On average, patients taking lorcaserin lost only 3.6 percent more weight than those taking a placebo, short of the 5 percent more that the U.S. Food and Drug Administration — and Wall Street — were looking for.
Arena’s stock dropped by 28 percent the day the trial results were announced, and has dropped another 26 percent since. As a result, the company found itself in the extremely difficult position of having to raise substantial amounts of money to get lorcaserin ready for market at a time when it is losing equity by the day. The layoffs, totaling 130 people, were done essentially to keep lorcaserin alive. I talked Monday with Lief about these harsh realities and what he thinks the future will hold. Here are some snippets from the conversation:
Were you surprised with the (trial) results?
No. We hit all of the FDA’s efficacy points. I think we have a very effective drug. A very safe drug that is very approvable. I was surprised that investors didn’t understand what our message was in the press release. To have our stock trashed like that was the big surprise for me.
Do have an explanation for it? Why did the analysts — why do you think Wall Street behaved the way it did?
Now that I have reflected on it. … I think the expectations were set incorrectly. I will take the blame for that. What we tried to do is tell investors what would be the best case. As it turns out, we were a little off. Having said that, we were really thrilled with the safety. … I think this drug could become the standard of care for weight management.
One of the questions the analysts I spoke to had was do you have enough cash to make it to lorcaserin’s NDA (new drug approval application)?
We have always said we plan on managing our resources to get to NDA. Could be an asset sale of some sort … obviously we had to reduce expenses. It is a very significant move. Keep in mind what we cut, but also what we kept. We kept the ability to file our NDA on schedule.
Do you have confidence that you will find a partner for lorcaserin?
Oh sure. There are a lot of companies interested in lorcaserin. We have companies coming in to do due diligence next week … here you have an approvable drug that is safe. The average person who stayed on the drug lost 18 pounds. This is not a wimpy drug. In only 8 weeks almost a third of patients lost 5 percent or more of their body weight. There were some patients who lost 20 percent, 25 percent of their body weight. When you lose a quarter of what you weighed going into the study — that is a big deal.
With the Blossom study, which is due to come out in September, talking to analysts, they say there is no reason for the average weight loss to be much different. What are you expecting from the Blossom study? (Note: Arena did two large-scale clinical trials for lorcaserin, named Bloom and Blossom. The results released last month were from Bloom. Results from Blossom are yet to be released.)
I would not want to raise expectations one iota. My expectation is that the Blossom will confirm the Bloom study in both efficacy and safety.
How much of what has happened (to Arena’s stock) is due to the overall bear market we are in — especially with biotechnology stocks?
It is hard to tell what components are more important. And what are less. We are in this great bear market, especially for companies like Arena that don’t have a product. … I think some investors believe that the FDA won’t approve anything for obesity. I completely disagree. I think there are a variety of risk factors you are seeing that have had a depressive effect on the stock price.