Arena Pharmaceuticals (ARNA) - FDA advisory panel meeting aftermath

Panel Vote
As expected, the FDA once again dished out a curve ball at the advisory meeting to a seemingly promising drug.  In total, out of 14 medical experts, 9 voted yes and 5 voted no for recommendation of Arena Pharmaceuticals' weight management drug, Lorcaserin.  This is yet another disappointing ending to a biotech firm seeking to break into the billion-dollar industry of weight control, following Vivus Inc.'s failure two months ago with its candidate, Qnexa, which was recommended against due to a number of safety concerns.

Sunken stock
The outcome sent ARNA stock crashing down, amassing a total of over 70% slash since the release of panel meeting notes.  This speaks to the power of biotech trading, which can turn heaven into hell in a matter of days.  So, what now?  Arena Pharmaceuticals' shares, once more than tripled in a month and a half, are now flattened by once hopeful investors.

Now what?!
After what we've seen with VVUS and ARNA, is this the end of the pursuit of the almighty FDA-approved diet pill?  Well, not so fast.  Just a reminder, information forwarded from the advisory panel to the FDA does not necessarily have to be followed by the drug regulator.  In other words, the FDA may come out and approve either one (or both) of VVUS' and ARNA's candidates despite the negative recommendation.  While the likelihood of that is slim, it is certainly not zero.  Keeping this in mind, one might choose the option of picking up cheap shares of both of these companies (especially ARNA) in hopes to see an incredible bounce back in the future, as near as Oct 28, 2010 for VVUS and Oct 22, 2010 for ARNA (PDUFAs).  VVUS has already recovered ~12% from the post-panel trough and there's still room to climb before the PDUFA.  Similarly, ARNA may follow suit and rebound from the horrific sell-off, presenting a way to make back some cash for head spinning investors.

A thin string of hope

As mentioned, selected medical experts will be assessing the marketability of Orexigenics Therapeutics' (OREX) diet therapy, Contrave, on Dec 17, 2010.  This will be an interesting timing as the industry will have seen the outcome of the FDA's final call on VVUS and ARNA's drugs.  Approved or rejected, the news will dramatically dictate OREX's fate and time will only tell which of these three companies will come out on top in this battle over the massive obesity market.  Fascinatingly, post release of panelmeeting notes/announcement of ARNA's panel result, OREX has already made an incredible 45% run in three trading sessions.  

At the moment, OREX is sitting just above the $6 mark.  Will it climb higher?  I certainly think so.  Look at ARNA.  After negative review of VVUS' Qnexa by the FDA, ARNA's shares surged ~86% in two weeks.
 
Are we going to see the same for OREX in the following two weeks?  We shall see!

Arena Pharmaceuticals (ARNA) - stock sinks in early trading post release of FDA's lukewarm comment on efficacy and safety

Concerns about drug safety again was at the centre of FDA's advisory panel opinion.  On top of that, the agency considers the 3% weight loss over the placebo group, shown in the Arena's late human trial, as being marginally efficacious compared to the FDA's 5% bench mark for weight control drugs.  The release of the meeting notes led to a 37% crash in ARNA during early trading.  Though seemingly hopeless, it may be time to load up on ARNA's close competitor, Orexigen Therapeutics(OREX), next one up in front experts from the FDA with its weight management drug, Contrave.  Alternatively, it may be a great time to pick up some beaten down ARNA shares in midst of overreaction later in the day depending on the extent of pessimism.

Arena Pharmaceuticals (ARNA) - Sept 16 panel weighing in on obesity market

Arena Pharmaceuticals is up next in front of picky FDA advisory committee with its potential weight loss blockbuster, Lorcaserin.  This will be a spotlight event as Arena's strong rival, Vivus Inc. (VVUS), failed to gain confidence within the advisory members last month with it's obesity drug candidate, Qnexa.

Recent dip in Arena's stock presents a great late entry for those wanting to play the last last minute run-up before  the panel gathering next THUR (Sept 16).  This will be a lightening fast trade as I never hold my position past the actual catalyst event.  My current buy target is $6.65.  While this is ambitious given ARNA's recent movement between ~$6.60 and ~$7.30, I feel like the only way to gain from the stock last minute is to be aggressive on low entry, which will produce positive return on any catalyst-driven spikes.

Questcor Pharmaceuticals (QCOR) - FDA notified 2nd PDUFA delay

QCOR surged in early trading, tapping $10.63 at one point (up ~9.5% from opening mark), in anticipation of FDA's drug approval.  The stock closed at $10.38 and shed 70% of the day's gain in after-hour trading with news of FDA's second delay in PDUFA action date.  Company press release halts major sell-off.

Just as health care providers and investors geared up to embrace FDA's approval of Questcor's infantile spasm drug, Acthar, another delay was dished out by the drug regulator 3 days before the scheduled action date.  Questcor informed the public about the status of their supplementary NDA (New Drug Application) today in its press release stating that 

the U.S. Food and Drug Administration (FDA) has informed Questcor that the FDA will require additional time beyond the current action date of September 11, 2010 to complete its review of Questcor's supplemental new drug application (sNDA) for H.P. Acthar Gel (repository corticotropin injection) in the treatment of infantile spasms (IS).

"We are pleased to be nearing the finish line and look forward to the FDA finalizing its review of our sNDA," indicated Don M. Bailey, Questcor's president and CEO, who remains optimistic about the status of review and reassured investors of a healthy balance sheet for the 3rd quarter of 2010.  Once again, the FDA never fails to surprise everyone last minute.

Satisfied with the early run-up, I exited all my positions at $10.58 just when the price started to dip down - 9% return in 8 days =)     

Questcor Pharmaceuticals (QCOR) - crossing the finish line in ~1 week

Questcor Pharmaceuticals (QCOR) is scheduled to hear from the FDA's decision regarding its infantile spasm drug, H.P Acthar Gel, on Sept 11, 2010 (since this falls on a Saturday, the announcement will be available most likely Friday or Monday).  An official stamp by the agency will allow Questcor to receive an orphan drug status and market and promote the drug specifically for the indication of infantile spasm, a serious form of epilepsy, or seizure disorder, occurring during infancy and childhood (~0.03 to 0.05% of live births).

Delay in June
Originally, the FDA was expected to announce the final call on H.P Acthar Gel's approval on June 11, causing the stock to rally at the time.  However, an unforeseen notification was issued to Questcor to postpone the key date to Sept 11, 2010.  News like this typically would drag the stock price down as investors retreat in panic.  Surprisingly, instead of a large scale sell off, the stock soared and gained 14% in 4 days after FDA's delay ($10.01 --> $11.44).

Cheerful note
The surge in stock price, while peculiar, may have resulted directly from the FDA's positive tone in its communication with QCOR:

The FDA extended the PDUFA date in order to review information regarding labeling and potential post-approval commitments that they solicited from Questcor.

"Labeling" and "post-approval commitments" sound to me like an 80% tilt in the direction of approval.  Furthermore, the advisory panel, which met on May 6, 2010, expressed willingness to support the passing of Questcor's drug.  The members voted 22 yes to 1 no when asked, "did Questcor provide substantial evidence of effectiveness of Acthar as a treatment for the patients with infantile spasms?" and 20 yes, 1 no, and 2 abstentions when asked, "did Questcor submit sufficient evidence of safety of Acthar at an effective dosing regimen?"

Stock trend
QCOR has seen its ups and downs in the past 3 month.  With the key PDUFA date ahead (Sept 11, 2010), the stock is poised for a run.  However, with the recent dismal outcome of drug reviews (e.g. Jazz Pharmacuticals, Vivus Inc.) and FDA's notorious unpredictable nature, nothing can be said for sure.  Nevertheless, in a recent note provided to his clients, John Newman, an Oppenheimer analyst, maintains a buy rating on QCOR with a $14 price target, expecting FDA's complete approval of Acthar Gel for the treatment of infantile spasm.  Upon approval, the drug could add $10 - 15 million to Questcor's already-impressive earnings and raise EPS by 4 to 9 cents.

Disclaimer:  Long QCOR