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FDA reviewers don't understand obesity drug: Arena

BOSTON (Reuters) – Shares of Arena Pharmaceuticals Inc plunged anew on Friday as the company blamed a lack of understanding on the part of U.S. reviewers for their failure to recommend approval of its experimental obesity drug.

On Thursday, an advisory panel to the U.S. Food and Drug Administration voted 9-5 against recommending the drug, lorcaserin, saying its potential risks outweighed the modest weight loss seen.

The panel's vote followed the release of briefing documents prepared by FDA staff ahead of the discussion that revealed that rats given high doses of lorcaserin developed tumors, a finding that took Wall Street by surprise.

On a conference call with analysts on Friday, Arena Chief Executive Jack Lief said it was a "shame" that there were no experts in potential cancer-causing agents on the panel.

"My view is they were having difficulty understanding the presentation," he said.

Lief evaded questions about when the company first knew about the pre-clinical cancer data in rats. Investors are angry that the first time they learned of the data was in the briefing documents prepared for the panel discussion, which were released on Tuesday.

Arena's shares fell 45 percent after the documents were released, as the cancer finding makes it less likely the drug will be approved. The FDA typically follows the advice of its advisory panel but not always

On Friday, the company's shares fell an additional 45 percent to $2.07 on Nasdaq.

"What I can say is when we learned of the data we promptly discussed it with the agency in full," Lief said. "It was determined we should proceed with the trial as planned. We kept the agency informed throughout the process, and we continue to believe the findings are not relevant to humans."

Lief defended himself against the notion that the company had a duty to disclose the cancer data to shareholders.

"There is an immense amount of data generated in drug development," he said. He said the company does not believe the rat data is relevant to humans, "and as such did not believe it to be material."

Still, some analysts said they think it is now highly unlikely the drug will be approved on the basis of the information submitted to the agency.

"We assume the FDA will request further animal carcinogenicity studies and potentially further animal heart valve studies, even new human studies to increase the evidence that lorcaserin will not cause cancer or heart valve issues in humans," said Jon LeCroy, an analyst at Hapoalim Securities.

Jason Zhang, an analyst at BMO Capital Markets cut his price target on Arena to $1 from $5.

"We now assign a very low probability of FDA approval for lorcaserin without additional trials," he said. "This is based on a relatively strong negative bias from the advisory panel, lukewarm public support, a modest efficacy profile, and clear breast cancer safety concerns from the FDA."

Lorcaserin is one of three obesity drugs under review by the FDA. An FDA panel in July urged against approval of a diet drug from Vivus Inc after voicing concerns about depression, memory loss and potential birth defects. Shares of Vivus fell 1.4 percent to $6.17.

Shares of Orexigen Therapeutics Inc, whose drug Contrave is expected to face FDA advisers in December, fell 6 percent to $6.36 on Nasdaq.

(Reporting by Toni Clarke, editing by Dave Zimmerman)