Arena is Hands Down a Better Investment than Vivus
Reza is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Obesity is viewed by some experts as the biggest challenge facing the health-care system.
In the words of a cardiologist:
“It is not poverty, malaria, war, malnutrition, religious persecution, racism, sexism, cancer, alcoholism, cigarettes, methamphetamines, heroin, cocaine, communism, capitalism, Obama, Romney, etc., it is the increasing BMI that is plaguing this nation and spreading all over the world.
Almost every patient I see in the hospital started out with obesity as their first problem. Then diabetes follows, hypertension, atherosclerosis, renal failure, heart failure, amputations, dialysis, respiratory failure, myocardial infarction, sepsis, stroke, and death. You would think the hospital beds are filled with people dying from cancer or damaged lungs from smoking. Wrong, the hospitals are filled to capacity with obese people.
Every day, young obese patients end up on life support machines, unable to breathe on their own, let along move or walk, their hearts, kidneys, lungs collapsing under the extreme weight. Even some lucky ones who get bariatric surgery only live a little longer after losing 100 pounds, because it really is too late.
Wake up America. Arena is truly a force for good in this struggle against a scourge of mankind.”
These medications have different modes of action. Wall Street so far has been promoting Vivus and disparaging Arena. A positive AdComm vote made that paradigm shift in Arena's favor. Now even journalists who are associated with hedge funds are admitting they were wrong and are predicting approval.
A third company, Orexigen Therapeutics (NASDAQ: OREX), is also in the race and in the process of reacting to a FDA "Complete Response Letter."
The market is so huge that there's plenty of room for more than one medication, but I believe Lorcaserin will be first to market. Arena has a strong partnership with a world-class company, Eisai, for distribution in the U.S. and other regions -- likely Europe will follow. Vivus doesn't have such a partnership and it seems that it may want to go it alone, which is a huge challenge. Vivus' REMS and safety concerns can make the launch more complicated. Arena already has manufacturing facilities ready to go.
A doctor wrote:
“Let's just assume that both QNEXA and LORQ are approved by the FDA and come on the market around the same time. If you are a physician, which would you prescribe first for your patient? Obviously, almost no physician would start both drugs for the patient at the same time. I would chose Lorq first since it's mechanism of action is best understood and it has the least side effect profile. I think 99% of my colleagues will agree with me on this. When we prescribe a chronic medication, such as for diabetes, hypertension, cholesterol, we almost never prescribe the most powerful. Instead, we chose the safest and best tolerated.
What we are not comfortable accepting or facing are consequences of birth defects and memory problems [associated with Qnexa]. LORQ does not cause any birth defect. This will be a particular concern for the majority of our patients who are obese and of child bearing age. No physician wants to cause a bad outcome by having his/her patient give birth to a child with birth defects. This will be interpreted as malpractice by most docs."
Another doctor wrote: “Lorqess represents a safe and urgently needed medication to address the obesity crisis in the general population of the US. The net weight loss results reported are effective across the age spectrum and compare most favorably with those of Qnexa from Vivus with no negative comparable side effect profile.”
A psychiatrist wrote: “I have been dealing with a huge population of obese patients with comorbid diseases including diabetes and CAD. If someone is saying that physicians are waiting for Qnexa it’s not true, because Qnexa is already in the market and anyone could mix generic phen/topamax. Physicians here in Southeast Missouri are waiting for lorcaserin."
Some physicians outright doubt whether Qnexa will be approved this time around. I personally think Qnexa might get approved but with heavy restrictions. I share the concern of several doctors that having Vivus available without heavy restrictions would be dangerous.
Arena offers an aggressive investor a much better growth opportunity than Vivus. Vivus is over-priced and over-hyped. Arena is beat down, over-bashed, ignored and misunderstood. Most analysts and journalists were shocked at the strong AdComm vote but to a lot of us retail longs who have done detailed due diligence, it was not shocking.
Given the huge short interest on Arena, and the clash of truth vs. the fiction that shorts have been building, an early or on-time approval of Lorcaserin would teach a costly and valuable lesson.
I expect institutional ownership on Arena to at least double within the several months. This should stabilize the PPS fluctuations. Until then the challenge for those like me who have decided to keep their shares at least until approval might be to not get swayed into selling by manipulation and wild swings and fluctuations.
I am long ARNA. This article reflects my subjective opinios as a non-expert and is not an investment advice. Please do your own research. For more info please see www.rezamusic.com. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.