It is safe to say that April 2009 was a month that San Diego-based Arena Pharmaceuticals would rather forget. Although Phase 3 trial data it released March 31 on its weight-loss drug lorcaserin met the benchmark set by the Food and Drug Administration, it didn’t do so in a convincing enough fashion for Wall Street.
The company’s stock plunged 28 percent the day the results were released. Less than a month later, Arena’s stock had continued to drop, the company had laid off a third of its workforce and industry analysts were saying that Arena CEO Jack Lief had overhyped his drug.
However, as the calendar turns to summer, things are looking up for Arena. On June 8, the company released additional data on lorcaserin showing that 66 percent of patients lost 5 percent of their body weight on the drug, and the average weight loss was nearly 18 pounds. As a result, the company’s stock price has shot up, and it was able to secure $100 million in financing to get lorcaserin through the FDA approval process.
I caught up with Lief today for a chat about the turnaround.
You are having a pretty good June, and it has a lot to do with the additional data you released on lorcaserin. What does the data say?
Unfortunately, at the end of March people were under a misunderstanding that somehow lorcaserin did not meet one of the expectations for approvability. Nothing could be further form the truth. We met all expectations, and we have been fighting uphill battle ever since. With recent data, investors are seeing the light that we fully met the efficacy guidance that he FDA has in place, which is that at least twice as many patients on the drug lost 5 percent or more of their body weight versus the placebo. We had almost two-and-a-half times the people meeting that benchmark.
What else did the expanded data show?
We talked about the people who completed one year of therapy on the drug. We showed that two-thirds of people on drug lost at least 5 percent of their body weight, and over a third lost 10 percent of their body weight. So this is not a wimpy drug, as we said before. And on top of that, the drug is very well tolerated. So a physician would basically not have much problem figuring that “gee the tolerability is like the placebo, but the efficacy is double or more. (And) there was a significant reduction in blood pressure, in lipids and a significant reduction in risk of type 2 diabetes. People are finally starting to see the light that the drug is extremely well tolerated.
What will the $100 million in financing that you secured this week help you do?
It allows us to finish our pivotal studies, file a [New Drug Application with the FDA] and gets us through to next year when the FDA due to make final approval. This gets us through a critical period of time — in the biotech industry it is called “the valley of doubt” — between starting our Phase 3 program and having our drug approved.
You secured $100 million, but you spent $50 million more than you brought in during the first quarter. Is that $100 million enough?
Keep in mind that our spending goes way down at the end of the year. At the beginning of the year we were doing all of our Phase 3 studies. In the second quarter investors will see that spending go down significantly, and third and fourth quarters will continue to go down. So the $50 million is not a good guide of what our spending will look like in latter half of the year, because these big clinical studies will be finished.
You have another set of data coming out later in the year. Do you think Wall Street will be more patient this time?
There is still a lot of controversy on Arena and lorcaserin. There are people who are shorting the stock who believe we will not get approved. Fortunately those people are in the minority. I think there is a growing understanding that lorcaserin is approvable. But that is what makes a market, the people who don’t believe it versus the people who do.
What are the chances, given the financing you secured, that you will be able to rehire any of the people who were laid off?
We refocused the company on lorcaserin. And we recognized that we really could not move some of our earlier stage drug candidates forward. So even with this hundred million, it still would not be sufficient. So we felt compelled to refocus and eliminate that spending. It was about a third of our employees.