Vivus Gets An Encouraging No

In a reversal of a recent trend, the FDA actually gave a glimmer of hope to a biotech company and its shareholders. Although almost everyone was counting on the FDA's rejection of Vivus's (Nasdaq:VVUS) obesity drug candidate Qnexa, the FDA left the window open wider than many people expected. With what amounts to an "encouraging rejection", there may yet again be reason to hope that at least one new obesity drug can make it to market in the foreseeable future. 

More Analysis, Please
When the FDA rejects a drug, it sends companies what is called a "complete response letter" (or CRL) outlining the agency's objections and indicating the sort of deficiencies that the company must correct before the FDA will reconsider approval. In some cases, the FDA requires new full-scale clinical trials, while other times the agency simply wants the results of trials already underway or new kinds of data analysis. (For related reading, check out FDA To Obesity Drugs: Drop Dead.)

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Arena's Big day Looms Large

For investors who believe in the predictive power of Wall Street, things are not looking good for Arena Pharmaceuticals (Nasdaq: ARNA), the small biotech that is facing an FDA panel meeting for its potential obesity drug lorcaserin. Amidst downgrades and worries about FDA concerns regarding safety and efficacy, Arena shares were off more than a third midday Tuesday. This follows in the wake of the surprising recommendation against approval in July for Vivus' (Nasdaq:VVUS) drug Qnexa and widespread uncertainty regarding Orexigen's (Nasdaq:OREX) Contrave. 

Is the Data Good Enough?
The biggest problem for Arena is the efficacy data. Although the one-year efficacy data on lorcaserin is okay, it is no blockbuster. More than 47% of patients who took lorcaserin in the BLOOM trial lost 5% or more of their baseline weight (versus about 20% in the placebo group), with an average loss of 5.8%. More than one in five people who took Lorcaserin saw better than 10% weight loss.


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Note: The editors at Investopedia made a small error here in the original version, capitalizing "lorcaserin", "valvulopathy", and "fenflueramine". That should all be changed and corrected soon. 

FDA Panel Rejects Vivus Obesity Drug

Wow!

I am cynical and bitter enough that very little surprises me any more (hey, I lived in DC four years, worked on Capitol Hill for a year, and worked for investment firms through two bubble/busts!). But I have to say that I am very surprised to see Vivus get KO'd at the FDA.

In a 10-6 vote, the FDA's panel voted NOT to recommend Qnexa for approval. The panel was apparently bothered by the risks of depression, birth defects, and memory loss, particularly in relation to the weight loss benefits seen with the pill. Overall, it looks like a lack of safety data is what really bothered the panelists.

Now, the FDA could go against this recommendation and approve the pill anyway. In the wake of the panel decision, even representatives from the FDA expressed surprise and made comments that could be interpreted as suggesting the panel was too conservative and was not "strongly" opposed to Qnexa.

The FDA did ignore a negative panel vote on an obesity drug before; that years ago when a panel voted against a weight loss drug called Redux. The FDA approved the drug anyway, the drug was a major hit initially ... and then was withdrawn because of severe side-effects. All in all, it cost Wyeth (now part of Pfizer) billions in legal costs and class-action settlements.So, I have to think that the FDA is going to be *extremely* cautious about doing anything that could repeat that disaster.

What's more, I hate to say it, but drugs like Qnexa are not strictly necessary. You *can* lose weight without drugs. I speak from experience; I have been fat my entire life, but I have lost about 65 lbs in the last 9 months, and I have not been using any pharmaceuticals (just diet and exercise).

Vivus' news is clearly going to chill the sector. I would expect to see Arena and Orexigen both sell off tomorrow on the presumption that the FDA is just not receptive to less-than-perfect obesity drugs. I think Orexigen's drug Contrave is particularly at risk - the efficacy is not that great and the side-effect profile was worse than Qnexa.

Arena does still have an outside shot here. The drug is not extremely effective, but it does help some. What's more, while it has side-effects, they do not seem to be too serious. My bigger fear, though, is that Arena gets caught up in guilt-by-association with Redux. Arena's drug lorcaserin is superficially similar to Redux and my fear is that the FDA panel looks at it and says "eh, why risk it?" and blacklists without realizing that Arena is different. Redux non-selectively stimulated 5-HT2b receptors; lorcaserin selectively stimulates 5-HT2c receptors. That is a major difference at the biochemistry level, and Arena's trials have shown none of the valvulopathy and pulmonary hypertension risks that doomed Redux, but will the panelists or the FDA care?

Vivus is not doomed yet. There is the chance that the FDA will overrule the panel. Vivus could also elect to try again when data from a 2-year study comes out later this quarter. Alternatively, the company may have to do a massive (10,000) additional Phase 3 study to fully allay these worries. Given the environment for financing right now (and the unusual deal that Arena had to strike with Eisai), I am not sure they can afford that.

All in all, a very surprising day.