No one at Arena Pharmaceuticals could accuse ceo Jack Lief of being a rat. In a conference call yesterday with analysts after an FDA panel rejected the drugmaker’s Lorqess diet pill due to safety concerns, Lief acknowledged that different forms of cancer had been seen in rats treated with high doses. But he stressed that “when we learned of the data, we promptly discussed it with the FDA.”
But then Cowen analyst Phil Nadeau asked if the info was ever made available to the public or was the FDA briefing document released this week the first time investors might have learned of this finding. Lief replied by saying “…we believe that (Lorqess) does not pose a cancer risk to humans at the recommended therapeutic dose…There is an immense amount of data generated in drug development. We did not, and still do not believe that the data’s relevant to humans and, as such, did not believe it was material to investors.”
Well, when the rat data was disclosed, investors thought otherwise. Arena stock fell as much as 42 percent after the briefing documents were posted by the FDA. As Jon LeCroy of Hapoalim Securities wrote in an investor note the next morning: “The fact that the FDA is questioning the efficacy and heart safety of Lorqess was not surprising, but the fact that malignancies of multiple types were seen in rats treated with high doses of the drug was quite surprising to us…Cancer risk is never good, especially in a product with weak efficacy in a non-life threatening disease.”
Of course, if you are or were an Arena investor the other day when the stock plunged, you would likely have preferred that the drugmaker had disclosed this data previously. Unless, you shorted the stock. Beyond self interest, though, what do you think? In principle, is the sort of information that should be disclosed?