2 Growth Catalysts Could Push Arena Pharmaceuticals, Inc. (ARNA) Higher In 2013

Arena had already advised investors about Europe’s more stringent approval criteria for weight-loss treatments compared to the U.S. For instance, the EMA guidelines provide that clinical trials assessing drug candidates intended for weight control should subject patients to a weight reducing diet run-in period. Its Phase 3 clinical trials did not include this requirement. EMA guidelines also prescribe primary and alternative primary efficacy criteria for weight loss drug candidates. The company believes that Belviq will satisfy the EMA’s alternative primary efficacy criterion, which measures the proportion of responders achieving more than 10% weight loss at the end of a 12-month period. However, Belviq is unlikely to meet the more stringent EMA primary efficacy criterion, which prescribes a demonstration of weight loss of at least 10% of baseline weight that is also at least 5% greater than the loss associated with the placebo.

Belviq’s placebo-adjusted weight loss from its trials was 3%, well below Europe’s primary efficacy criterion. The FDA had concerns similar to European regulators about the safety and efficacy of Belviq last year. Arena was able to satisfy the FDA concerns sufficiently enough to gain approval, but this should not be seen as a certainty of approval in Europe. On a risk/benefit basis, Vivus had strong data for Qsymia, yet the application was rejected in Europe.

Conclusion

The delay in Europe is not by any means the end of the world, and the next price catalyst for the stock will almost certainly be a successful launch of Belviq in the U.S. Arena has Eisai as a marketing partner for Belviq, and the presence of a strong partner will give the company an advantage over Vivus. The weak launch by Vivus puts less competitive pressure on the company and plenty of space to make a strong initial launch.

Analysts have low expectations of initial sales. Jeffries lowered its 2013 sales forecast by 70%. An analyst at JPMorgan forecast sales of $74 million for 2013 growing to $481 million in 2016.  A strong performance will provide strong upside for the stock. I recommend buying Arena with the expectation of two upcoming growth catalysts – a successful U.S. launch followed by approval in Europe.

The article 2 Growth Catalysts Could Push This Pharmaceutical Higher In 2013 originally appeared on Fool.com and is written by Jordo Bivona.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.