October 2018

Purpose of this writeup is to share our research, facts, and opinions about Arena. This is not an investment advice.

Arena Pharmaceuticals (Nasdaq: ARNA) Arena is a world leader in development of novel, small molecule drugs with optimized receptor PK/PD. Its highly selective targeting GPCR technology produces highly efficacious drugs with very clean safety profiles. This has been proven by an approved drug and a rich pipeline with stellar data. Arena is poised to deliver at least three more first- or best-in-class compounds addressing multi-billion dollar markets.

·      Ralinepag, a best-in-class agent for pulmonary arterial hypertension (PAH) with stellar phase 2 trial data, demonstrated an unprecedented 20% improvement in pulmonary vascular resistance in patients that were already on dual background therapy. The pharmacokinetic (PK) and pharmacodynamic (PD) characteristics of ralinepag deliver unprecedented intravenous-like pharmacology in an oral medication. FDA discussions are ongoing and phase 3 trial plans (possibly fast-track) will be out shortly.  Three independent phase 3 trials for ralinepag are expected to launch in 2H 2018.  The ralinepag extension study results confirmed the stellar results achieved in the main trial. Oral prostacyclin is expected to grow ~50%, with ralinepag potentially capturing 50% of the class. The differentiation study against selexipag will have a switch design and it's expected that ralinepag will be better than selexipag in improving PVR at peak and trough exposures.

·      Etrasimod is a best-in-class S1P modulator with strong receptor selectivity for both S1P1 and the additional therapeutic targets S1P4 and S1P5.  Unlike competitor compounds, etrasimod has no off-target activity against the deleterious S1P2 and S1P3 receptors.  Etrasimod was generally safe and well tolerated with no serious adverse events recorded at the high dose (2 mg).  Market research indicates that etrasimod has over eighty commercially viable target indications. So far, it has shown class-leading, rapid onset (and offset) of T-lymphocyte counts on a background of no significant off-target safety concerns (cardiovascular, ocular, or hepatic) as seen with competitor compounds.  Etrasimod P2 data readouts (both primary and secondary) were spectacular with 33% of patients in the high dose (2 mg) group achieving clinical remission despite having been exposed to heavy (and often unsuccessful) pre-treatment with biologics. In addition to the UC and Crohn’s Ph3 programs, Arena has an ongoing PBC P2 trial and has disclosed plans for an atopic dermatitis Ph2 trial for next year.

·      Olorinab is a best-in-class cannabinoid receptor type 2 (CB2) full agonist for visceral (and other types) of pain and, based upon the literature, may have potent anti-inflammatory activity as well.  ARNA released better than expected P2 data in 3Q2018 showing excellent, statistically significant efficacy and as with Arena's other drugs, excellent safety. The excellent efficacy comes without psychotropic or addictive properties.  Olorinab has virtually zero CB1 activity and does not penetrate the blood brain barrier.

·      Nelotanserin is a serotonin receptor inverse agonist licensed to Axovant for study in sleep and movement disorders in patients with Lewy body dementia.  P2 data is due in 2H 2018. Nelotanserin binds to a receptor of the central nervous system, called the 5HT2a receptor, which has been implicated in mental disorders and is associated with neuropsychiatric disturbances, including visual hallucinations. Although Nelotanserin binds to the 5HT2a receptor, it prevents the receptor from activating its response (inverse agonist). Jan 2018: “For nelotanserin, we are encouraged by the positive trend in motor improvement observed on the UPDRS, especially in patients with DLB, and by the efficacy signal in patients with more severe SAPS-PD scores at baseline, particularly given the short treatment period at what we believe is the correct therapeutic dose.

·      Belviq (lorcaserin) is a best-in-class 5HT2c agonist approved for obesity and is designed to avoid the off-target activity (against the 5HT2b receptor) that contributed to the downfall of fenfluramine (fen-phen). Belviq has excellent efficacy and a very clean safety profile. Please see www.belsuccess.com

·      APD418 is a First-in-Class Calcium-independent Myofilament Derepressor (CMD) for Decompensated Heart Failure (DHF).

·      The The ARNA spin-off – Beacon Discovery GPCR research engine – has inked collaborations with Johnson & Johnson, Boehringer Ingelheim, Takeda, Escient Pharmaceuticals, and others. Arena will have a share of Beacon's success. https://www.beacondiscovery.com/our-collaborators.

·      Arena has a large inventory of other compounds and a rich IP war chest.  Management has stated that a new phase 2 ready cardiovascular asset is to be introduced in the 2H of 2018. 

·      Arena spent a billion dollars developing lorcaserin and therefore has a huge tax-loss write-off potential that could prove to be very favorable. 

·      Arena is financially strong and organizationally lean, having gone through a major reset the last two years, with 90% new management. Arena had $593 million in cash as of June 30, 2018.

VALUATION: Currently, Arena is grossly undervalued at around $2 billion (current fair value is $8B+ in our opinion).

·      Ralinepag alone, which has demonstrated best-in-class characteristics and superiority to selexipag (Uptravi), has a fair value of at least $7 billion (J&J paid around $7 billion for Selexipag as part of their Actelion acquisition). 

·      Etrasimod shows significant superiority over ozanimod in efficacy and safety at the same level of development and should be valued at $7 billion. Celgene paid that much for Receptos just to get ozanimod.   Recent and unexpected clinical data released by Celgene has raised significant concerns about safety issues (e.g. very long-half life) with ozanimod.   A short half-life (claimed by Receptos) was one of the differentiating safety factors (vs. Gilenya) responsible for the acquisition of Receptos by Celgene.

·      Olorinab is the first-ever highly specific full agonist of the CB2 receptor in development and may represent a suitable replacement for opioids in many pain situations (value: $15 billion+?).

BUYOUT / PARTNERSHIP: Arena is an unheralded, undervalued gem which can significantly boost a large healthcare company’s pipeline and market position. "Big Pharma" which is thirsty for boosting its pipeline will likely acquire Arena within the next 12 months for possibly over $10 billion (our guess) ($200/share).

We do not represent the company, so for more information, please visit www.arenapharm.com or contact Arena’s CFO, Mr. Kevin Lind, at (858) 210-3636.


Arena Private Investor Group

From NASDAQ.com- summary of analyst ratings as of Oct 2018:

From NASDAQ.com- summay of analyst ratings as of 1 July 2019

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Arena's official site is www.arenapharm.com


Belviq (lorcaserin) is a best-in-class 5HT2c agonist approved for obesity and is designed to avoid the off-target activity (against the 5HT2b receptor) that contributed to the downfall of fenfluramine (fen-phen).  The medical community has been eagerly awaiting the results of a 6-year, 12,000 patient P4 cardiovascular outcome trial (CVOT) and today (July 17, 2018) Eisai released topline results from this trial where it was established that Belviq met its primary safety objective, finding that long-term treatment with BELVIQ does not increase incidence of MACE, defined as cardiovascular death or non-fatal myocardial infarction or non-fatal stroke, in overweight and obese patients at high risk for CV events. With this result, BELVIQ becomes the first- ever weight loss medication approved for chronic weight management to achieve this objective in a dedicated long-term cardiovascular outcome trial.  These results most importantly demonstrates that chronic use of Belviq does not cause the valvular pathology that was associated with the use of the weight loss blockbuster drug fen-phen.   This alone removes a huge impediment that caused many weight loss doctors to be very cautious about prescribing Belviq for weight loss.   In summary todays preliminary results demonstrated:

1)   BELVIQ became the first medicine used for chronic weight control to establish cardiovascular safety per FDA guidelines
2) A reduction in progression to type 2 diabetes in patients without diabetes

3) Improvement in multiple cardiovascular risk factors including beneficial changes in lipid profiles, blood pressure, blood glucose and renal function.

  1. blood lipid profiles improved
  2. blood pressure lowered
  3. blood glucose levels decreased and
  4. improved renal function

We expect the release of additional detailed and positive data from this trial in the coming months that should help establish Belviq as the premier weight loss drug available today and additionally open up the use of Belviq in additional indications (currently under study) for application in smoking cessation, cocaine abuse, opioid abuse and others

 (Please see www.belsuccess.com, where some patients describe having profound weight-loss of over 100 pounds without any side effects.) CVOT results will allow for label expansion to Type 2 diabetes (T2DM) (interim data suggests prevention of progression to T2DM). Arena receives a tiered royalty (9.5–18.5%) from partner Eisai.

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