Can Belviq survive without Europe?
The fact that the Drug Enforcement Agency is dragging its heels with recently approved weight-loss drug Belviq isn’t helping shares of its maker, Arena Pharmaceuticals (NASDAQ:ARNA). And last week’s decision to withdraw its marketing application in Europe — before the European Medicines Agency had a chance to reject Belviq — certainly dealt the stock a devastating blow.
Perhaps nothing is as insulting to Arena, however, as the recent Reuters article that compared Belviq to fen-phen, the diet pill that was yanked by the FDA in 1997 when it was implicated as the cause of heart-valve damage for some users.
The end result: Deserved or not, Belviq has now officially become a three-ring circus.
Ironically, this doesn’t mean Arena isn’t investment-worthy. It just means fans and followers need to mentally regroup, armed with facts and perspective rather than headlines and hyperbole.
Truth be told, the fen-phen comparison isn’t exactly unfair.
Fen-phen is a combination of two drugs: fenfluramine (a serotonin-releasing drug) and phentermine (a serotonin- and dopamine-releasing drug). Belviq also tweaks a person’s serotonin levels — by stimulating the brain’s serotonin receptors, thus enhancing the “feel-good” factor — and, like fen-phen, subsequently decreasing appetite.
So what? Well, although phentermine is mostly safe, fenfluramine has been linked to more heart problems than its maker, Wyeth, had originally disclosed. By September 1997, when all these risks had fully come to light, the FDA took fen-phen off the shelves.
Arena’s shareholders and supporters will be quick to point out that Belviq isn’t fen-phen. In fact, it contains neither of the two drugs that made up fen-phen, and therefore shouldn’t be compared to the drug that was all the rage in the mid-’90s until it hit a wall in 1997.
Critics will be just as quick to counter by saying that Belviq might not have the same molecular makeup as fen-phen, but both are serotoninergic agents. As several third-party studies have determined, excessive serotonin production (via carcinoid syndrome) does indeed cause pulmonary hypertension and heart-valve damage.
Checkmate? Well, not quite.
While it’s known that excessive serotonin can cause heart problems, extensive trials of Belviq never actually indicated that approved usage of the drug spurred cardiovascular problems, contrary to popular belief. (That false memory was spurred by 16-year-old market wounds.) Only unapproved and untested dosages could crank up serotonin levels to the point where it becomes a significant cardiovascular risk.
While it is true the FDA suggested that Arena Pharmaceuticals monitor the drug’s side effects post-approval, it still gave the drug the green light despite the fen-phen fiasco from 16 years earlier.
Remember, the fen-phen debacle was embarrassing for the Food & Drug Administration, too. It’s unlikely the FDA would risk losing credibility again unless it was very, very sure the drug wouldn’t induce the heart-based issues fen-phen did.
While the fen-phen comparison will lose steam and become a fading memory soon enough here in the United States, it’s pretty clear that Europe isn’t interested in the drug, and won’t be anytime soon.
So what’s Europe’s beef? It’s not exactly clear. All drug applications must go through a preview committee before the EMA makes a final ruling. With Belviq, the committee has raised questions regarding mental instability, tumors in rats and (you guessed it) cardiovascular disorders. All are problems that could be expected with many, many therapies of this ilk.
Just for the record, the European Medicines Agency is looking at the same basic data the United States’ FDA did before the American agency approved Belviq. And broadly speaking, Europe is more progressive and less restrictive than the U.S. when it comes to new drugs.
With this particular case, however, we can see that the pharmaceutical business is still more about people and opinions than it is about science and numbers.
While Arena has not made the specifics of the EMA’s issues known — and that’s assuming there’s anything specific to know — the decision to withdraw the new drug application in Europe at least tacitly implies the company knows it’s fighting an uphill battle, at least with the current application. Arena could resubmit the application in the future, with more details that will relieve some of those worries.
Then again, considering it’s already been through the wringer twice with the FDA, it’s tough to imagine Arena performing yet another round of testing just to satisfy the EMA, especially when the European agency is concerned about common, potentially unavoidable side effects.
Meanwhile, Back at the Ranch
With Europe out of the picture until further notice, that puts the spotlight back on the company’s dance with the DEA here in the United States.
The DEA’s concern is the potential abuse of the drug. As was noted, Belviq increases the reception of serotonin. If enough serotonin floods the brain, it can create hallucinations, not unlike LSD. As such, the DEA must rule on how exactly it needs to be scheduled — or classified — before it can be sold.
Just to be clear, the DEA’s pending ruling has nothing to do with Belviq’s approval of efficacy; it’s just a procedural decision that has become obnoxiously overdue.
Thing is, it doesn’t even really matter which of the two most-likely classifications the DEA uses to classify the drug. Both the Schedule IV and the slightly more ominous Schedule III classifications allow patients to acquire five refills every six months with a valid prescription. As such, neither doctors nor patients are going to have any logistical problems with the drug.
The bottom line? Arena Pharmaceuticals is still well-positioned in the United States, and is expected by some analysts to drive nearly $400 million per year in U.S.-based royalty revenue by 2016. It’s not an unreasonable assumption, given that the United States’ weight-loss market is worth nearly $150 billion per year.
Getting Europe on board would be nice, and that still might happen in the future. After all, the EMA’s issues with Belviq are suspiciously nondescript, and it’s possible the agency might just be testing the company while simultaneously showboating to make a point (in the shadow of the United States’ snafu with fen-phen).
When it’s all said and done, though, Arena doesn’t need Europe, and the drug hasn’t actually been demonstrated to cause heart problems when used in prescribed doses.
It’s just going to take a while for the dust to settle before the rest of the market figures that out.
As of this writing, James Brumley did not hold a position in Arena Pharmaceuticals.