The Barrett Edge

Arena Pharmaceuticals Receives FDA Approval

Arena Pharmaceuticals (NASDAQ:ARNA) received FDA approval for its weight-loss drug Belviq. The interest in weight loss drugs is going to grow, at least for a while. It’s important to realize that this particular segment of healthcare is primarily driven by consumers who are willing to spend Billions of their own money to lose wait and look fit, consequently causing revenue and profits to increase from drugs like Belviq. However, it’s important to be cautious as it’s uncertain if insurance companies will be willing to subsidize payment for these drugs.

Weight Management is more crucial and applicable today than ever before – as obesity is at its highest rate and the amount of fast foods that U.S. and International Consumers consume is greater than ever before. According to the Centers for Disease Control and Prevention, more than one-third of U.S. adults were obese in 2009-2010. Studies indicate that an intervention that affects a weight loss of 3% to 8% can result in meaningful improvements in cardiovascular risk factors (i.e., lipids, blood pressure and blood glucose), quality of life and functional capacity as well as a significant reduction in the incidence of type 2 diabetes.

In the past there was speculation that Belviq would not gain FDA approval as past weight loss drugs have had difficulties. Fen-Phen for example was a disaster as it turned out that it had serious cardiac implications. Presently, there are few pharmaceutical treatment options to help patients lose weight. As a result, Belviq has become the first FDA drug to treat obesity in over a decade. I salute management’s execution in creating a compound and getting it through the vigorous FDA process. Now it’s time to see if management can execute with its U.S. marketing partner, Eisai pharmaceuticals to produce and market Belviq.

The bottom line is that consumers need to feel that Belviq is a strong and effective option to lose weight, and to lose it quickly. Now it’s time to see if Belviq is really an asset that throws off revenue and makes money for its investors- not just some hype. Let’s see if management knows how to market a product that is intrinsically desirable. They need to act fast and establish market share because in the rear view mirror competition is creeping up.

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