By Reza Ganjavi - December 27, 2012 | Tickers: ARNA, OREX, VVUS | 6 Comments
Patients, doctors, and investors endured a six-month wait for the United States Drug Enforcement Agency (DEA) to schedule Belviq (lorcaserin hydrochloride), the first weight loss drug approved in 13 years by the FDA. Arena Pharmaceuticals (NASDAQ: ARNA) stands to substantially benefit from the success of Belviq as the obesity epidemic effects more than 100 million Americans, an estimated 500 million patients globally. Belviq is also effective in treating type 2 diabetes (T2DM), which is another huge market in itself. Even a 1% market penetration means a much higher valuation than its current one.
The DEA recently announced that it has scheduled Belviq as schedule 4 -- in line with the FDA's recommendation -- which indicates Belviq has a low risk for abuse:
"Schedule 4 drugs, such as Xanax, Valium, and Ambien, have the next-to-lowest potential for abuse on the DEA's five-part schedule. Schedule 1 drugs, such as LSD and marijuana, are considered by the DEA to have a high potential for abuse and no accepted medical use. Schedule 5 drugs, such as Robitussin, contain low amounts of narcotics."
Prior to the announcement, a representative from the DEA told me that they have received so many calls inquiring about Belviq that they have assigned a liaison to take those calls. Many people also wrote emails to the DEA. Some of these can be found here.
The strong public anticipation for Belviq may be indicative of a strong launch that will occur as soon as Belviq's scheduling is finalized by the DEA. The next step in the process is a 30-day public comment period which ends on January 18, followed by a period in which the DEA reviews the comments, and a standard waiting period before the drug can be marketed. However, Federal regulation allows for exceptions due to "conditions for public health or safety necessitate an earlier effective date."
The DEA should, and I am cautiously optimistic that it will, grant an exception for Belviq so that the average wait time of 49 days since filing of the proposed rule (which started on December 18th), can be shortened to the minimum of 30 days, which means Eisai could theoretically initiate the launch late January instead of late March. This two-month expedition can have a significant positive impact on millions of lives.
Belviq would not be the first drug to receive expedited treatment, and surely, after a 6-month wait, patients and doctors seriously deserve the expediting. The DEA has granted an expedited process for other drugs such as zopiclone, pregabalin, ezogabine; and Belviq's necessity is much more important than all those drugs given the crippling epidemic of obesity. Arena's partner, Eisai, has filed a petition with the DEA to grant an earlier effective date, presenting a strong argument.
With completion of scheduling Arena will collect a $65 million milestone payment from Eisai which will boost Arena's already strong balance sheet.