NEW YORK Arena Pharmaceuticals (ARNA.O) said its experimental obesity drug helped patients shed only about 10 pounds more than those taking placebos, sending its shares down 34 percent.
The company is seeking U.S. approval this year for the drug, Lorcaserin, based on the long-awaited new data that it said was favorable by a statistically significant margin.
"Although the results technically satisfy the FDA requirements for approvability, we consider the weight loss benefits to be underwhelming at best," JPMorgan said in a research note.
The average patient taking Lorcaserin for a year had lost 8.2 percent of body weight, or 17.9 pounds, the company said. That compared with 3.4 percent of body weight lost, or 7.3 pounds, among patients taking placebos in the first of the company's three planned late-stage studies. Patients in both groups also adhered to a program of moderate diet and exercise.
In a conference call with analysts, executives said the weight loss was similar to that typically seen with approved obesity treatments, including amphetamines, but without their tendency to cause insomnia and potential addiction.
Arena stressed that Lorcaserin met all its safety and efficacy goals, with an incidence of serious adverse events similar to placebo.
Even so, Needham analyst Alan Carr cut his rating on the tiny San Diego drugmaker to "hold" from "buy," saying the modest average weight loss may deter potential marketing partners and limit patient interest in the medicine.
"We note a challenging cash position" for Arena, Carr added, referring to the company's holdings of $110 million in cash and short-term investments at the end of 2008. Arena spent $150 million last year on research and development.
About 48 percent of those taking Lorcaserin in the trial lost 5 percent or more of their body weight, which Arena said satisfies an effectiveness guideline set by the U.S. Food and Drug Administration. That compared with about 20.3 percent in the placebo group.
The 3,182-patient U.S. study showed no signs that the drug over a two-year treatment period caused heart valve damage, the problem that forced Wyeth WYE.N to recall its blockbuster "fen-phen" diet drugs in 1997. The recall cost Wyeth more than $21 billion in damages and legal expenses and has long cast a shadow over obesity treatments.
Like drugs used in fen-phen, Lorcaserin affects a messenger chemical called serotonin, but is designed to selectively target only one variety of the chemical -- and thereby sidestep heart-related side effects seen with Wyeth's withdrawn pills.
Arena expects to have final data from a second Phase III study in hand by September and hopes to ask U.S. regulators to approve Lorcaserin by year-end.
The future of Arena, which lost almost $240 million last year on revenue of less than $10 million, is highly dependent on whether the FDA approves Lorcaserin and whether patients embrace the treatment.
Shares of Arena were down $1.48 at $3.03 in midday trading.
(Reporting by Ransdell Pierson; Editing by Lisa Von Ahn and Derek Caney)