Arena Loses Merck Collaboration After Clogged-Artery Drug Fails Clinical Trial

Xconomy San Diego — 

Somebody always delivers some bad news on the slow days before Christmas, and this year, it’s Arena Pharmaceuticals. The San Diego-based biotech company said today that pharma giant Merck has cancelled a research collaboration with Arena after an experimental drug for improving levels of the so-called “good” cholesterol failed to reach its goal in a mid-stage clinical trial.

This was apparently an unhappy surprise for investors getting ready for the holidays. Shares of Arena (NASDAQ: ARNA) dropped more than 16 percent in after-hours trading following the announcement.

The Arena collaboration with Merck dates back to October 2002, in which Arena said it received $4 million upfront and expected to pull in another $10 million in milestones over the first year. The goal was to develop a drug that stimulated the niacin receptor, as a way of treating clogged arteries, or atherosclerosis. But Merck informed Arena that it was pulling the plug on the program after a randomized, placebo-controlled study failed to reach its goal for boosting levels of the so-called “good” HDL cholesterol.

“We are disappointed that the trial results did not lead to further development of this program, but it has been a pleasure to work with Merck and we welcome the opportunity to collaborate again,” said Arena CEO Jack Lief, in a statement. Merck’s vice president Andrew Plump had some nice parting words for Arena, saying in a statement that, “this collaboration has led to excellent scientific interaction.”

While losing a collaboration with Merck can’t be interpreted as positive, it’s not the end of the world for Arena. The company is betting its future on lorcaserin, its internally developed drug for weight loss. Arena filed this week for FDA clearance to start marketing the product, based on 18 clinical trials that enrolled more than 8,600 patients. Arena’s investors and collaborators have invested about $1 billion in this molecule, and they are hoping it will become a mass-marketed hit for losing weight. This drug’s progress in clinical trials, and its competitive standing against San Diego’s Orexigen Therapeutics (NASDAQ: OREX) and Mountain View, CA-based Vivus (NASDAQ: VVUS), has been one of the big biotech stories of the year.