Can Arna Pharmaceuticals Hold Its Own above 6.30?
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Arna Pharmaceuticals (NASDAQ: ARNA) shot up Friday! Thursday it closed at 3.66 and on Friday the stock reached a high of 7.02 before finally closing at 6.36. This is still a 73.4% gain from one day to the next. It is not as surprise as the stock started to rise from Wednesday when it opened at 3.10. The whole bullish journey was in anticipation of the FDA Advisory Committee’s vote in favor of Lorcaserin's benefit/risk profile for weight management. With such a huge climb in one day, I ask the question: Can Arna Pharmaceuticals stay above 6.36?
The weight loss industry itself has an estimated market of $20 billion in the U.S.alone, so the potential profits for Arna Pharmaceuticals are great. The weight loss drug demonstrated that it helped patients achieve highly significant categorical and absolute weight loss in the first year. Those who continued treatment with Lorcaserin in the second year it helped them maintain their weight loss. Other improvements in cardiovascular risk profile included: lipid levels, heart rate, and hsCRP levels, without increasing cardio-toxicity.
But—the approval was not without concerns.
There remain some concerns with the approval without additional clinical data. The majority of committee members appeared to vote in favor of approval—but some could be described as approving ‘reluctantly’ because of unanswered questions about lorcaserin's effectiveness when it came to the drug's cardiovascular (CV) risk. The consistency of the efficacy results through the studies supported the collective evidence for the lorcaserin 10 mg bid. However, while statistically effective, it did not fully meet the benchmarks for clinical significance that are described in the Agency’s Weight Management Guidance (2007). There was no statistical increase in valve risk found. The hesitations lie with the fact that the FDA set a boundary of 1.15 (relative risk) for the purpose of to rule out any excess risk of VHD. In the study, the drug’s relative risk was 1.16, just above the level.
Its greatest competition may come from Vivus (NASDAQ: VVUS). A new drug Qnexa, awaiting approval from the U.S. Food and Drug Administration showed promising results in a recent international trial. Volunteers who took the drugs experienced substantial weight loss even with weight related health problems. Earlier this year, the FDA panel recommended approval and it is scheduled for July 17th
The risk to the price of the stock remaining at or above the level it presently sits at will be determined by a couple factors. Will the panel call for a Valvulopathy study after the overall approval of the drug? What happens if it does not pass? Will they require more safety trials prior to final approval?
These facts remain as a catalyst to support or break the price of the stock. Can the company remain above 6.00? The answer to that question will be defined by further recommendations from the FDA Advisory Committee.
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