Analysts are lowering their price targets for shares of Arena Pharmaceuticals Inc. after the drug developer said Thursday that it was withdrawing its application for approval of the weight loss drug Belviq in Europe.
The San Diego company also said, when it reported first-quarter results. that the company is still waiting for a U.S. decision on the status of the drug.
The Food and Drug Administration approved Belviq last June, but it has yet to hit the market. The Drug Enforcement Administration is proposing that Belviq be classified as a Schedule IV controlled substance, which means it has a relatively low potential for abuse. Arena and its partner Eisai Co. can't start marketing Belviq until that classification is approved. It's not clear when that will happen.
Belviq, or lorcaserin, is designed to stimulate serotonin receptors in the brain linked with feelings of satiety, leading patients to feel full. It was one of two new prescription weight loss drugs approved by the FDA last year, along with Vivus treatment Qsyimia. That drug went on sale in September.
For Europe, Arena said it is evaluating the best way to submit its application again at a later date. That application withdrawal is the main reason Credit Suisse analyst Lee Kalowski lowered his target price on the stock by a dollar to $5.
"We had viewed a rejection as a distinct possibility," Kalowski said in a Friday morning research note, adding, though, that the announcement coinciding with first-quarter earnings was a little surprising.
Jefferies analyst Thomas Wei said in a separate note he removed Belviq sales outside the United States from his statistical models for future company performance. That led him to lower his price target on the stock to $12 from $14.
Even so, Wei said Arena's decision in Europe was not material to his thesis on the company because he expects the biggest market opportunity for Belviq to be in the United States.
Arena also said Thursday its first-quarter loss narrowed to $18.9 million, or 9 cents per share on $2.37 million in revenue.
The company's stock sank about 15 percent, or $1.25, to $7.15 Friday morning before markets opened.