Arenas New Obesity Drug Could Fatten Company's Stance in the Market
Bio-Pharmaceutical Firm to Go After Piece of Multi-Billion-Dollar Pie
By KATIE WEEKS
San Diego Business Journal Staff
Scientist Mark Macias works in the laboratory at Arena Pharmaceuticals. Analysts are praising the company's obesity drug.
Arena Pharmaceuticals Inc. founder and Chief Executive Officer Jack Lief earns almost a million dollars a year.
If Arenas highly touted obesity drug garners much of what analysts say could be the biggest pharmaceutical market ever, Lief's wallet could get even fatter.
Just two drugs are on the market for obesity, Roches Zenical and Abbott Laboratories Meridia, and both have side effects and poor patient retention, say analysts. Together, they pull in around $500 million worldwide, but the U.S. market potential for a drug that treats obesity effectively with few or no side effects is at least $2 billion to $5 billion, analysts say.
With more than 64 percent of adults overweight in America ” 35 percent in California ” some imagine sales could be even higher.
Arenas drug Lorcaserin recently began the third and last stage of human clinical trials before the Food and Drug Administration considers it for market approval. Lorcaserin works by stimulating a serotonin receptor in the brain, which helps regulate appetite and metabolism. Lief said it targets the receptor more selectively than obesity drugs that have more side effects. The third phase is expected to last two years and involves 6,000 obese or overweight patients.
Tests have shown Lorcaserin has no apparent effects on the heart, unlike diet drugs containing fenfluramine. The FDA pulled Fhen phen¯ diet drugs from the market in 1997 amid reports of the drug causing heart valve damage. Tens of thousands of patients sued drug maker Wyeth.
Were going to dispel all that fear, said Lief, 60.
Sales Talk
He said Arena is talking with large, multinational pharmaceutical companies about partnering to create a sales force to market Lorcaserin, should it be approved.
We're prepared to sell it by ourselves without a partner, he said, adding that 750 salespeople will be needed to reach the 6 percent of doctors who prescribe 51 percent of all obesity drugs. He said if the company sells Lorcaserin alone, Arena could grow to 1,000 employees in five years ā€” which is when Lorcaserin would hit the market if approved.
Lief's independence and determination have brought him a long way. Local venture capitalists did not see Arenas early promise, and Lief used his own money and that of angel investors to get Arena, which now has 340 employees, off the ground.
Our technology was disruptive. It's just the opposite of what textbooks taught, Lief said. We didn't even bother with the VCs.
It's difficult to find anyone saying anything nasty about the company these days.
With San Diego-based Neurocrine Biosciences Inc. in limbo over a mixed review from the Food and Drug Administration regarding the sleeping pill Indiplon, Arena has emerged as a local biotech darling.
All the data Ive seen seems to tell me the drug works, and its quite safe, said Shiv Kapoor, a biotechnology analyst in Montgomery & Co.'s San Francisco office. It has a high probability of approval.
Patients who took Lorcaserin in a daily 20-milligram dose for 12 weeks lost around 8 pounds, but the drug is not without its side effects. More than 5 percent of the patients enrolled in the phase two clinical trial experienced headache, nausea, dizziness, vomiting, dry mouth, fatigue or urinary tract infections.
Competition Coming
And Arena is not alone in its pursuit.
Sanofi Aventis obesity drug Acomplia was approved in the United Kingdom this year, and is wading through regulatory muster in the United States.
A handful of other companies have obesity drugs in advanced stage clinical trials, including New York-based Regeneron Pharmaceuticals Inc.'s Axokine, though it is known for causing nausea and a dry cough. Illinois-based Takedas Cetilistat began the last stage of clinical trials early this year in Japan, and has not been associated with serious side effects. Pfizers CP945598 is a serious competitor, but wont likely reach the market until 2009, according to IMS Health, a Fairfield, Conn.-based financial forecasting company.
Some analysts have been saying of late that the current mood at the Food and Drug Administration is to focus on approval of life threatening drugs.
But with obesity causing 400,000 American deaths each year, according to the Centers for Disease Control and Prevention, obesity can be seen as life threatening said Steve Brozak, a New York-based analyst with San Diego-based WBB Securities.
Its anybody's guess ” period, Brozak said of Lorcaserin's approval chances. The FDA is being watched very carefully by many folks who believe it is too restrictive or too rash. Lorcaserin is going to be a novel therapeutic. Obesity is very high on the FDAs radar screen.
On The Rise
Lief, who grew up in New Jersey, founded Arena in 1997 after a friend of his put him in touch with two San Diego scientists. One, Dominic Behan, is the company's chief scientific officer. The other has since left the company to become the CEO of an East Coast biotech, Lief said.
Before Arena, Lief spent two years consulting for bio-pharmaceutical companies and five years as senior vice president of corporate development at Cephalon Inc., a Frazer, Penn.-based biotechnology firm. He also spent more than a decade at Abbott Laboratories, overseeing international marketing research upon his departure.
Brozak said when he began covering Arena, the stock sold for $5 per share. Today, it has climbed steadily and trades at around $15 on the Nasdaq under the symbol ARNA.
Its not just the drug, its the platform of drug discovery and the company, Brozak said.
Arena also has a therapy for insomnia in phase two trials, and is developing medicines for thrombosis and type two diabetes. The company has garnered collaborations with Merck & Co., and Ortho-McNeil Inc.
Lief said he's the opposite of a micromanager, and that contributes to the positive culture at the company, including a low turnover rate.
Theres a harmony in the company, Lief said, adding that Arena has no reserved parking spaces for upper-level employees. You get the feeling when people have a big smile on their faces.¯
He laughs at the irony when he admits the obesity drug company has no internal workout facility.
One of these days, well be able to afford one of those, Lief said.
Obesity Pill
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