The DEA Confirmed Physicians Can Combine Belviq-Phentermine

Joseph is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Arena's (ARNA) new FDA approved obesity drug will be debuting on June 7, 2013, just in time for summer weather across the United States when most people use outdoor activities to try to lose weight and live healthier. Scientists at the DEA recently announced that they welcomed into the world of drug compounds the newest molecule Belviq (Lorcaserin) as a schedule IV controlled substance. The molecule was developed and discovered by Arena Pharmaceuticals, Inc. It was fantastic news thatthe DEA placed Belviq in a schedule IV classification allowing physicians to liberally prescribe Belviq to patients by fast electronic script through local pharmacies for a three-month supply (180 pills) at a time. The medicine is easily prescribed by physicians of any specialty, including general practitioners, in pill form 10 mg twice daily. This novel obesity medicine is expected to be available on June 7 2013, at a pharmacy near you, across the United States when the DEA final rule becomes effective.

1. The DEA Final Rule Authorized the Use of Belviq-Phentermine starting June 7 2013

Few investors read or understand the contents in the final rule issued by the DEA, which by the way revealed a diamond in the rough on Page 7. We long term investors fought long and hard so that Bel-Phen could be born. As shown by the extraordinary number of comments received by the DEA Belviq's opposition vehemently argued against allowing Belviq to be scheduled as a schedule IV medicine because some of them realized that legally physicians' can combine Belviq-Phentermine to accelerate weight less benefits. In response to the short interest and competitor remarks trying to restrict the new compound's unique uses, the DEA clearly stated physicians could immediately combine Belviq-Phentermine:

"Phentermine Being Combined with Lorcaserin

Eight commenters expressed concern about the probability that healthcare providers would prescribe phentermine with lorcaserin to increase weight loss results in patients. DEA Response: Prescriptions for controlled substances, including lorcaserin, must be issued for a legitimate medical purpose by an individual practitioner acting in the usual course of professional practice. A determination of the validity of a prescription depends on an evaluation of the particular circumstances surrounding its issuance."

Belviq is only the latest example of the tremendous help that biotechnology can be to humanity. In July 2010, scientists reported in the New England Journal of Medicinethat scientific data showed Belviq (Lorcaserin) used in conjunction with behavioral modification caused significantly greater weight loss and improved maintenance of weight loss compared to placebo. Lorcaserin also improved values for biomarkers that may be predictive of future cardiovascular events, including lipid levels, insulin resistance, levels of inflammatory markers and blood pressure. Arena reports that responders to the medicine have lost an average of 11% of their body weight.

Belviq's demand side story could not be more bullish. Obesity continues to expand throughout the world, as well as the concomitant pre-diabetes and Type II diabetes. The global diabetes population is well into the 100's of millions. This is a company with a paradigm-changing product addressing a humongous global unmet medical need backed by a successful marketing partner Eisai. The World Health Organization obesity is one of the greatest public health challenges of the 21st century. Its prevalence has tripled in many countries of the WHO European Region since the 1980s, and the numbers of those affected continue to rise at an alarming rate, particularly among children. WHO estimated "in 2008, more than 1.4 billion adults, 20 and older, were overweight. Of these over 200 million men and nearly 300 million women were obese."

Belviq is expected to cost approximately $1,700/year per patient. Aetna and Blue Cross have announced coverage for Belviq. The number of patients expected to use Belviq in the first year (2013) is between 200,000 and 500,000. The user population is expected to grow to 4 million by 2016.

2. ARNA should consider resubmitting the EU application to initially seek approval for Belviq for 6 months use only

Arena announced it withdrew its EU marketing application in the EU because it did not have enough time to address the non-clinical issues presented by the CHMP. In my opinion, the EU application could have easily been approved with use parameter's such as if non-responders are advised to stop use after 12 weeks, and responders are advised to continue use for 16 more weeks. Clinical trials showed that responders typically will lose most of their total weight loss in the first 6 months of treatment. In the non-clinical studies i.e., rats, there is no safety/toxicity issue at all in the first 6 months of exposure. The scientific data is solid in this regard. If the use parameters are set temporarily as I have stated here, ARNA could be able to launch Belviq in Europe in the near future. Initially, Arena could receive all the revenues from the non-responders, and later on, when Belviq is fully approved for longer use, the responders would help demonstrate that the drug works superbly for them. In the meantime, Arena could answer the CHMP's non-clinical issues disclosed in the recent press release, and then after Belviq is marketed in the US for one year or so, Arena should have no problem expanding approval to Belviq's unrestricted use in the EU.

3. Belviq is a brand new unique single molecule that has the potential for other combinations

In addition to Belviq-Phentermine, Arena management in their March, 2013, conference call disclosed they are developing a plan to seek FDA approval to combine Lorcaserin/Metformin in one combo-tablet for obese T2DM patients since there is no need for more clinical trials. The FDA and the scientific community have extensive data about this combination already. For example, the FDA has in the past approved Vicodin, which is an analgesic tablet that contains two active ingredients. Arena should be allowed to launch it together with Belviq. We realize the need to do more clinical trials only if they want to also sell Metaformin combo to non-obese T2DM patients, but they can do this later or concurrently with the launch.

4. Arena and Eisai should spend $10M for a robust TV and Internet advertising campaign

Historically, pharmaceutical companies have used direct-to-consumer ad campaigns with a great return on their investment, and typically recover the capital invested in marketing quickly in the form of increased sales. In the pharmaceutical business, physicians rather than the consumer of the medicine, are the key to market penetration since the patient cannot purchase the medicine without a prescription. A team of sales representatives, typically referred to as 'detailers', have been historically employed by the pharmaceutical companies to meet with physicians to explain the advantages of a particular medicine. Using this model each major new drug has been launched with a comprehensive and expensive national or global marketing campaign that involved the full range of marketing tools including media advertising, comprehensive information packs, special events for doctors, conference presentations, and a dedicated sales force. Eisai disclosed in investor presentations, on pages 21-29, it has been working hard for the past year, while the DEA delayed scheduling, to cover the necessary steps to ensure the launch is successful.

In conclusion, I recommend adding to long positions, with both hands, ahead of the marketing launch and life-cycle management development planned for this unique single agent molecule (Belviq) that is intended to target obesity and its associate comorbidities, which is the largest epidemic in recorded world history. I rate the stock a strong buy ahead of sales.

I am long Arena. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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