Cowen Arena

EQUITY RESEARCH

INITIATING COVERAGEBiotechnologyOctober 3, 2013Simos Simeonidis, [email protected] 646.562.1386Yatin [email protected] 646.562.1388Raymond Chang, [email protected] 646.562.1337

ARENA PHARMACEUTICALS (NASDAQ:ARNA)

Initiation: BELVIQ's modest efficacykeeps us on the sidelines

RecommendationRating: Market PerformPrice Target (in $): $4.50Expected Return: (10.0)%Dividend: NAEnterprise Value (MM): $994.0

Earnings Per Share2012A 2013E 2014E

Q1 $(0.18) $(0.09)A $(0.08)Q2 $(0.12) $0.18A $(0.08)Q3 $(0.07) $(0.13) $(0.08)Q4 $(0.10) $(0.13) $(0.04)FY $(0.45) $(0.16) $(0.28)

Stock Statistics as of 10/02/2013 (in $)Price: $5.0052W Range: $11.00-$4.78Shares Out (MM): 234.8Market Cap (MM): $1,089.7Net Debt (MM): 0.0Net Cash Per Share: 0.76 FundamentalsRevenue (MM) ('12A) 27.6Revenue (MM) ('13E) 81.1Revenue (MM) ('14E) 37.5

We are initiating coverage of Arena Pharmaceuticals with aMarket Perform rating and $4.50 price target. Despite well-structured partnerships and the potential for an efficaciouscombination follow-on product, BELVIQ's modest efficacykeeps us on the sidelines on ARNA.

BELVIQ has a role in the new obesity landscape, but its efficacy is modest, andits safety profile is not without its issues.We expect BELVIQ (lorcaserin) to find a niche in the obesity space, possibly among femaleand diabetic obese patients, both large patient groups. However, we view its efficacy asmarginal, and we expect this to be a major roadblock to this drug's commercial success. Weexpect BELVIQ will have a difficult time competing head-to-head with Qsymia and Contrave,should it get approved. In addition, BELVIQ's safety is not pristine either, since it comes withwarnings about serotonin syndrome and valvular heart disease.

BELVIQ/Phen combo may be the future for Arena, but if it is, that will likely notbe for a number of years.Arena and Eisai recently announced plans to test the BELVIQ-plus-phentermine combination.We believe this combination has the potential for significant weight loss, similar to that of Fen-Phen, its predecessor, and theoretically without the disastrous side effects, given lorcaserin'sselectivity for the serotonin 2C (vs. the 2B) receptor. However, 1) it could be a number ofyears until "Bel-Phen" gets to market & 2) the regulatory path, including CVOT requirements,is unclear. Despite that, 3) we have assumed that "Bel-Phen" is approved, have included it inour revenue estimates, and had it account for a significant portion of NPV in ARNA.

Close to 52-week low, ARNA still trades on par or at premium to obesity peers.ARNA shares, close to a 52-week low, still trade at EV ~$1B, either on par or even at apremium to obesity peers VVUS ($10.19, Outperform) ($1B), OREX ($6.06 Outperform)($750M). Our sum-of-the-parts NPV analysis points to a fair value of $4.59/share. Therefore,and despite recent decline in ARNA shares, we consider ARNA fairly valued and as evenhaving some potential room for further downside.

Please see addendum of this report for important disclosures.

www.cowen.comMEMBER: FINRA/SIPC

Company Description

Arena’s lead product, BELVIQ (lorcaserin), a selective serotonin (5-HT) 2C receptor agonist,

was approved by the FDA for the treatment of obesity (―chronic weight management‖) in June

2012 and was launched in the U.S. in June 2013. BELVIQ has demonstrated modest weight

loss with a relatively benign safety profile in three Phase III trials. BELVIQ has been classified

by the U.S. Drug Enforcement Administration (DEA) as a Schedule IV drug. Arena has

partnered BELVIQ with Eisai in North and South America. Under this agreement, Arena sells

BELVIQ to Eisai at ―transfer prices‖ (i.e. royalty rates) ranging from 31.5%-36.5% of Eisai’s

annual net sales in the U.S. Additionally, Arena is entitled to receive up to $1.2B in milestones

and ―purchase price adjustments‖ (i.e. sales milestones) from Eisai. Through its G-protein-

coupled receptor (GPCR)-focused drug discovery platform, Arena has internally developed

early stage pipeline candidates, which include: 1) temanogrel, an inverse agonist of the

serotonin 2A receptor, which has completed two Phase I trials and is being developed in

partnership with South Korean biopharma Ildong for treatment of thrombotic diseases; 2)

APD811, an orally available agonist of the prostacyclin (IP) receptor for the treatment of

pulmonary arterial hypertension (PAH), which has recently completed Phase I testing in

healthy volunteers, and will be evaluated in a Phase II trial in 1Q14; 3) APD334, an S1P1

receptor agonist, which is being developed as a potential treatment for autoimmune diseases,

including multiple sclerosis and rheumatoid arthritis, and recently completed Phase I dosing in

healthy volunteers; and 4) APD371, a CB2 receptor agonist, currently in preclinical

development as a potential treatment for pain. Arena was founded in 1997, is based in San

Diego, CA, and currently has approximately 290 employees.

Arena: R&D Pipeline

Candidate name Indication P-C I II III FILING MKT Comments

BELVIQ Obesity • Launched in the US on June 7, 2013 by Eisai

BELVIQ + Phentermine Obesity • Eisai to initiate a 12-week pilot study YE13/1Q14

Temanogrel Thrombotic disease • Partnered with Ildong

APD811 Pulmonary arterial hypertension (PAH) • Phase II in PAH to be initiated 1Q14

APD334 Autoimmune diseases • Completed dosing in a Phase I trial in healthy subjects

APD371 Pain •

Total Drugs in Development 1 4 0 0 0 1

San Diego, CA Investor Relations Contact: Cindy McGee - 858.453.7200 x 1479 Source: Cowen and Company

www.cowen.comMEMBER: FINRA/SIPC 2

EQUITY RESEARCHCowen and Company, LLC

Arena: Expected Milestones

Milestones Timing

Regulatory submission in South Korea YE13/1Q14

Regulatory submission in Brazil YE13/1Q14

Initiate a 12-week pilot study of BELVIQ in combination with Phentermine ( conducted by Eisai ) YE13/1Q14

Phase I PK data for BELVIQ in combination with Phentermine (conducted by Arena ) 2013/14

Decision on Mexican MAA filing 2014

Decision on Canadian MAA filing 2014

Ildong to initiate a Phase I trial of temanogrel YE13

Initiation of a Phase II trial of APD811 in PAH 1Q14

BELVIQ

Other pipeline

Source: Cowen and Company



Investment Thesis

We are initiating coverage of Arena Pharmaceuticals (ARNA) with a Market Perform

rating and a 12-month price target of $4.50/share. Our thesis on ARNA is that the

company’s lead asset, BELVIQ (lorcaserin), a novel, twice-a-day agent approved in the U.S.

for the treatment of obesity (―chronic weight management‖), which was launched in the U.S.

market in June 2013, will have a very difficult time garnering significant market share, mainly

due to its modest efficacy. In addition, the compound’s safety is not without its issues, since in

addition to the carcinogenicity and valvulopathy signals that emerged in its preclinical studies,

the BELVIQ label includes warnings about serotonin syndrome (a potentially significant issue,

since many overweight and obese patients present with depression and take SSRIs) and

valvular heart disease (with the Fen-Phen history still very fresh in physicians’ minds). Our

view of BELVIQ’s overall clinical profile is based on A) our own analysis of the BELVIQ clinical

dataset, in conjunction with the datasets from the Qsymia and Contrave clinical trials, and B) a

100-physician survey that we conducted in order to gain an understanding of prescribers’

views of these new anti-obesity agents, which we have included at the end of our initiation.

Qsymia could make things very difficult for BELVIQ in the next 12 months…Our detailed

analysis of the clinical datasets for the three obesity compounds, which is included in the back

of our report, leads us to believe that Qsymia will end up being the leader in the market, given

its strong weight loss efficacy, which comes with once-a-day convenience. Furthermore, and

despite the fact that Vivus’ recently ousted management team and board have faced significant

difficulties in the Qsymia launch thus far, most of which have been self-inflicted by, for

example, not partnering the drug, as Arena management did appropriately, in our view, we

expect that the recent changes at Vivus may serve to relieve some of these issues, for

example, if the new team manages to secure a commercial partner for Qsymia.

Were such a partnership to materialize, especially one in which Qsymia would be partnered

with a big pharma or specialty pharma company with considerable experience in marketing

primary care products in the metabolic space, and one in which a substantial level of

commercial resources would be committed, this could pose an even more daunting

commercial threat to BELVIQ, which until recently was facing a theoretically much easier

opponent: Qsymia was approved with a fairly ominous REMS program, was only available via

mail-order, and was (still is) being detailed by a 180-person salesforce. Right now, the REMS

has been modified, and the drug is available in retail pharmacies; again, should the new

regime at Vivus manage to convert its formidable Rolodex into a strong partnership, BELVIQ,

with its modest-to-underwhelming weight loss, and the shadows (justified or not) of

carcinogenicity and valvulopathy association in some physicians’ minds (again, fair or unfair),

could be in very serious commercial trouble.

…and after that, things could get even tougher, should Contrave make it to the market.

We expect the Qsymia-BELVIQ duopoly to become a three-way fight approximately 12 months

from now, with the U.S. approval of Contrave. Orexigen’s Contrave is a combination of

bupropion, an antidepressant with which U.S. PCPs are very familiar and very comfortable

prescribing (26M scripts annually), and naltrexone, an agent that is approved for the treatment



of addiction and the main function of which is to reduce cravings. This combination product is

currently being tested in the LIGHT cardiovascular outcomes trial (CVOT). Interim data from

this trial are expected by early December 2013, and if positive, Orexigen is expecting to

resubmit the Contrave NDA by YE13; this drug could thus be on the market in 2H14. We view

Contrave as a formidable commercial opponent for both BELVIQ and Qsymia in the

obesity/weight loss space, and as one that could quickly garner significant market share and

pose a formidable competitive threat to both Qsymia and BELVIQ for the following reasons:

1) We view Contrave’s mechanism of action, given the combination of the two components

that are present in Contrave, as uniquely positioned to be very effective in the treatment of

obesity, since A) depression is a comorbidity in a large proportion of the obese population

(25-35%, according to a number of sources) and B) helping to deal with cravings and

binge-eating are viewed as especially helpful by the obesity experts with whom we have

consulted,

2) Contrave would be the only anti-obesity agent on the U.S. market that would have been

tested in and received the FDA’s OK to get to the market following (interim) data from a

CVOT study,

3) Contrave has a North American (plus Mexico) partnership with Takeda, which is a

company with a significant diabetes presence in the U.S., given the Actos/alogliptin

franchise, and appears to have committed substantial commercial resources behind this

product in terms of a primary care salesforce first position calling effort,

4) Contrave would be the only one of the three anti-obesity agents that could be sampled,

since both Qsymia and BELVIQ are DEA-scheduled drugs.

We don’t see the upside in ARNA shares…even though we have included

BELVIQ/Phentermine, E.U. BELVIQ revenues, and $1.2B in WW sales. Our Market Perform

rating on ARNA is based on our sum-of-the-parts NPV analysis, which includes revenues from

sales of both BELVIQ and the BELVIQ/Phentermine combination product in the U.S., and from

BELVIQ’s E.U. sales, where we have assumed Arena will be able to secure a partnership with

similar terms as in North America and other territories. We have modeled total peak U.S. sales

of BELVIQ and its combination product with Phentermine of $915M in 2029. We have also

modeled peak E.U. BELVIQ sales of $246M in 2026, and total WW sales of $1.2B in 2026. In

addition, we have assumed revenues from sales of BELVIQ and the BELVIQ/Phentermine

combination product in the other two territories for which Arena has secured partnerships,

namely South Korea and Taiwan.

While one could certainly make the argument that our revenue projections may have left room

for upside in BELVIQ sales, especially when compared to our projections for Qsymia and

Contrave, both of which we consider more efficacious products and thus more commercially

robust for a therapeutic area in which efficacy, in addition to safety, is of paramount

importance, it is also important to acknowledge that in our modeling assumption, we have

included projections for BELVIQ/Phentermine, a potential product for which we don’t know if



and when it will get to the market, and, if and when it does, how it will do commercially, given

its inevitable association (fair or unfair, and that’s definitely one argument its competitors will

attempt to make) in physicians’ minds with Fen-Phen. In addition, we have also included in our

NPV calculations revenues from E.U. sales of BELVIQ, while again, we don’t know if and when

BELVIQ will get to the E.U. market. Based on all these modeling assumptions, we have arrived

at our 12-month price target of $4.50/share and our Market Perform rating on ARNA.



Arena Partnered With Eisai to Market BELVIQ in North & South America

On July 1, 2010, two months before the first FDA AdCom in September 2010, which voted 9-5

against BELVIQ’s approval, Arena and Eisai announced a partnership agreement to market

BELVIQ in the U.S. The agreement was amended on May 10, 2012, the day of the second

FDA AdCom, which voted 18-4 to recommend BELVIQ’s approval, to include most of North

and South America, including Canada, Mexico, and Brazil. Under the agreement, Arena

received $50M as an upfront payment, $5M for the amendment, a $20M milestone payment for

inclusion in the BELVIQ label of data from the Phase III BLOOM-DM trial in T2D patients, a

$65M milestone upon DEA scheduling and launch, and a $1M milestone for regulatory

submissions in Mexico and Canada, for a total of $141M in milestone payments to date.

Under the terms of the agreement, Arena manufactures BELVIQ at its facility in Switzerland

and sells finished product to Eisai. The ―transfer price‖ (NOTE: this is the term used in the

agreement and one that Arena management has been using in its communications with

investors, and we believe it is equivalent to what most companies and investors commonly

refer as “royalty rate”) starts at 31.5% of Eisai’s annual net product sales and will increase on a

tiered basis, reaching a maximum rate of 36.5% on the portion of annual net product sales

exceeding $750M. Under the agreement, Arena is also entitled to receive up to $53.5M for

regulatory filings and approvals. In total, Arena is eligible to receive up to $1.19B in one-time

―purchase price adjustments‖ (NOTE: again, this is the term used in the agreement and one

that Arena management has been using in its communications with investors, and we believe it

is equivalent to what most companies and investors commonly refer as “sales milestones”).

These one-time purchase price adjustments would be paid in seven payments, and begin to be

triggered at annual net BELVIQ sales of $250M. The caveat here is that, in order for Arena to

receive all the milestones for which it is eligible, BELVIQ must achieve annual sales of $2.5B in

all the territories covered by the agreement.



Arena and Eisai Partnership Summary

Partner Eisai

Geographies Eisai owns rights to North and South America (including Canada, Mexico and Brazil)

Partnership date Partnered with Eisai in July 2010; amended May 2012

Upfront payment $50M

US: 31.5%-36.5%

Other territories: 30.75%-35.75%

Amount received thus far

$141M ($50M in upfront; $5M for amending the agreement, and $20M in milestones

for including Phase III BLOOM-DM in the label; $65M received on DEA scheduling

and delivery of launch supply to Eisai; $1M for regulatory filings in Mexico and

Canada )

Regulatory milestones remaining $53.5M for regulatory filings and approvals

$185M in one-time purchase price adjustments for annual net sales in ex-US territories

Total potential purchase price

adjustment payments

up to $1.2B (would have to achieve at least $2.5B in annual sales in all the territorries

covered by the agreement)

Patent life

US patents expire mid-2023; (Arena has guided it believes it can receive up to an additional

three years of patent extension under Hatch-Waxman, extending US patents until mid-

2026)

Post-marketing costsEisai will pay for 90% of CVOT expenses and Arena will pay 10%;

Arena is responsible for 50% of certain pediatric development costs

Purchase price

adjustments/milestones

Transfer price

$330M in one-time purchase price adjustments ($300M) and milestones ($30M) with annual

net sales from $250M-$1B in the US.

Source: Cowen and Company, SEC Filings

Breakdown of Seven Purchase Price Adjustment Payments

Total Eisai Annual

Net Sales

Adjustment Payments to Arena in

Addition to Transfer Price

$250M $25M

$X $X

$X $X

$X $X

$X $X

$X $X

$2.5B $X

Total: $1.16B

Company disclosure

Source: Cowen and Company, SEC filings

Arena Partnered with Ildong for South Korean Rights

In November 2012, Arena and Ildong Pharmaceuticals entered into a collaboration agreement

to market BELVIQ in South Korea. Under the terms of the agreement, Arena received $5M as

an upfront payment and is entitled to receive $3M upon approval. Ildong is responsible for

development, regulatory approval, and ultimately, marketing and distribution of BELVIQ in

South Korea, including all related costs and expenses. Similarly to the agreement between

Arena and Eisai, Arena will sell finished product to Ildong. The purchase price will start at 35%

of Ildong’s annual net product sales, and will increase on a tiered basis up to 45% on the



portion of annual net sales exceeding $15M. In its 2Q13 earnings call, Arena announced that

Ildong would file for regulatory approval in South Korea around YE13.

Arena Partnered with CY Biotech for Taiwanese Rights

In July 2013, Arena announced a marketing and supply agreement with CY Biotech Company

(CYB) for BELVIQ in Taiwan. Under the terms of the agreement, Arena received $2M as an

upfront payment and is eligible for a milestone payment upon approval of the first additional

BELVIQ indication in Taiwan. CYB is responsible for development, regulatory approval,

marketing, and distribution of BELVIQ in Taiwan, including all related costs and expenses.

Similarly to the agreement between Arena and Eisai, Arena will sell finished product to CYB.

The purchase price will be 45% of CYB’s annual net product sales, and Arena is eligible for

purchase price adjustment payments (which we understand to be equivalent to sales-based

milestone payments) based on annual net sales by CYB.



Valuation

To value ARNA shares, we use a sum-of-the-parts methodology, and estimate the probability-

adjusted NPV of: 1) the BELVIQ royalty stream, 2) the four pipeline compounds, and 3) the

company’s current net cash position.

1) BELVIQ royalties and milestones ($3.62/share)

i) Eisai collaboration: In exchange for North and South American (including Canada, Mexico,

and Brazil) rights for BELVIQ, Arena is entitled to receive up to $1.2B in sales milestones and

purchase price adjustments (i.e sales milestones) from Eisai.

Under the terms of the agreement, Arena will sell finished product to Eisai. The ―transfer price‖

(i.e. royalty rate) will start at 31.5% of Eisai’s annual net product sales and will increase on a

tiered basis up to 36.5% on the portion of annual net product sales exceeding $750M. In June

2013, Arena received a $65M cash milestone from Eisai for DEA scheduling and the U.S.

launch of BELVIQ. In addition, according to the agreement with Eisai, on the year when annual

sales in the North and South American regions reach $250M, Arena will receive $55M as a

cash milestone from Eisai: a milestone payment of $30M, and the first purchase price

adjustment of $25M. In our model, we have assumed this happens in 2018. We have also

assumed that similar purchase price adjustments of $55M, $100M, and $150M will materialize

in 2020, 2022, and 2026, when BELVIQ sales in these regions reach $500M, $750M, and $1B

respectively.

Cowen Revenue Model: Eisai Selling Price Assumptions

1 < $ 2 5 0 M : 3 1 .5 %

2 $ 2 5 0 - $ 7 5 0 M : 3 4 %

3 > $ 7 5 0 : 3 6 .5 %

T ie rs


ii) E.U. collaboration: We have assumed that Arena will enter into a collaboration agreement

with a pharmaceutical company for E.U. rights to BELVIQ. We have also assumed that Arena

will be able to secure similar economics for E.U. rights as for North/South American rights with

Eisai. We have assumed that Arena will receive an upfront payment of $100M in 2015 and

$50M in 2016 for commercial launch milestones. Arena will also receive $50M as a first

commercial milestone in 2018, $50M as a second commercial milestone in 2020, $50M as a

third commercial milestone in 2022, and a final commercial milestone of $75M in 2024. Arena

will sell finished product to its E.U. partner at a purchase price of 36% of annual net product

sales.

iii) Ildong collaboration: In exchange for South Korean rights to BELVIQ, Arena received

$5M as an upfront payment and is entitled to receive $3M on approval. Arena will sell finished

product to Eisai at a purchase price that will start at 35% of Ildong’s annual net product sales



and will increase on a tiered basis up to 45% of the portion of annual net sales exceeding

$15M. The table below lists the selling price assumptions which we have used in our model for

South Korean sales.

Cowen Revenue Model: Ildong Selling Price Assumptions

1 < $ 5 M : 3 5 %

2 $ 5 - $ 1 5 M : 4 0 %

3 > $ 1 5 M : 4 5 %

Tie rs

Source: Cowen and Company, SEC filings

iv) CY Biotech collaboration: In exchange for Taiwanese rights to BELVIQ, Arena received

$2M as an upfront payment and is eligible for a milestone payment upon approval of an

additional BELVIQ indication in Taiwan. Similar to the agreement between Arena and

Eisai/Ildong, Arena will sell finished product to CYB. The purchase price will be 45% of CYB’s

annual net product sales, and Arena is eligible for purchase price adjustment payments (which

we understand to be equivalent to sales-based milestone payments) based on annual net

sales by CYB.

Patent life assumptions: BELVIQ is covered by issued U.S. and E.U. patents that expire in

mid-2023. Arena has already filed for extension under Hatch-Waxman. In our NPV

calculations, we have assumed that Arena will receive a 3-year patent extension under Hatch-

Waxman, resulting in U.S. patent expiry in mid-2026. Further, we have assumed that the

BELVIQ/Phentermine combination will be introduced to the U.S. in 2018, which will extend the

patent life beyond 2026, because of the longer patent life of BELVIQ/Phentermine. In the E.U.,

BELVIQ will be eligible to receive 10-year exclusivity, which will end in mid-2026, assuming a

2016 launch.

U.S./E.U./South Korea/Taiwan BELVIQ sales: We have modeled that BELVIQ could reach

peak sales of $915M, $246M, $50M, and $24M in the U.S., E.U., South Korea, and Taiwan,

respectively, for total peak sales of $1.2B in 2026.

Discount Rate and Probability of Success (POS): In calculating the net present value of

BELVIQ’s free cash flows, we use a 10% discount rate. We have also probability-adjusted the

E.U., South Korean (SK), and Taiwan royalties to Arena by assigning a 50%, 80%, and 80%

probability of success (POS) that the compound is approved and reaches the market in the

E.U., South Korea, and Taiwan, respectively. Using these assumptions, as shown in the table

below, we arrive at a probability-adjusted NPV for BELVIQ of $3.62/share.



BELVIQ NPV analysis – US

($MM) 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

Total US Sales 18 54 88 122 158 290 372 462 634 806 753 797 844 894 901 907 915

Total revenue on US sales to ARNA 6 17 28 39 50 92 120 151 209 269 250 266 283 301 303 305 308

Total US revenues to ARNA 6 17 28 39 50 92 120 151 209 269 250 266 283 301 303 305 308

COGS 2 5 5 7 10 14 19 23 32 40 38 40 42 45 45 45 46

SG&A 33 35 36 36 37 38 19 20 20 21 21 21 22 22 23 23 24

R&D expenses 17 20 20 20 20 20 0 0 0 0 0 0 0 0 0 0 0

Milestone payments - Eisai 65 10 10 10 0 55 0 55 0 100 0 0 0 150 0 0 0

Tax adjusted EBIT 18 (33) (23) (15) (17) 71 76 139 134 247 153 153 164 288 177 178 179

Tax rate 0% 0% 0% 0% 0% 5% 8% 15% 15% 20% 20% 25% 25% 25% 25% 25% 25%

BELVIQ free cash flow 18 (33) (23) (15) (17) 71 76 139 134 247 153 153 164 288 177 178 179% y/y growth -286% -29% -35% 10% -525% 6% 83% -3% 84% -38% 0% 7% 75% -39% 1% 1%

Discount Period 0.24 1.24 2.24 3.24 4.24 5.24 6.24 7.24 8.24 9.24 10.24 11.24 12.24 13.24 14.24 15.24 16.24

Discount Factor 0.98 0.89 0.81 0.73 0.67 0.61 0.55 0.50 0.46 0.41 0.38 0.34 0.31 0.28 0.26 0.23 0.21

PV of BELVIQ Free Cash Flow $17 ($29) ($19) ($11) ($11) $43 $42 $69 $61 $102 $58 $53 $51 $81 $45 $42 $38

Discount Rate 10%

Perpetual Growth Rate 0%

Final year FCF $0

Terminal Value $0

Discount Factor

Present Value of Terminal Value $0

Present Value of Cash Flows $615

Present Value of Total Cash Flows $615

Fully Diluted Shares Outstanding 235

Present Value of Cash Flows Per Share $2.62

Probability of success 100%

BELVIQ NPV $2.62 Source: Cowen and Company



BELVIQ NPV analysis – E.U.


Total EU Sales - 16 35 55 78 101 128 157 176 198 221 246 25 12 12

Royalties on EU sales - - - 6 13 20 28 36 46 56 63 71 79 88 9 4 4

Total EU revenues to ARNA - - - 6 13 20 28 36 46 56 63 71 79 88 9 4 4

COGS 0 0 1 2 3 4 5 6 8 9 10 11 12 1 1 1

Milestone payments - EU 100 50 0 50 0 50 0 50 0 75 0 0 0 0 0

Tax adjusted EBIT - - 100 55 10 64 22 69 34 79 44 102 51 57 6 3 3

Tax rate 0% 0% 0% 0% 0% 5% 8% 15% 15% 20% 20% 25% 25% 25% 25% 25% 25%

BELVIQ free cash flow 0 0 100 55 10 64 22 69 34 79 44 102 51 57 6 3 3% y/y growth -45% -81% 509% -65% 211% -51% 134% -45% 134% -50% 11% -90% -50% 0%

Discount Period 0.24 1.24 2.24 3.24 4.24 5.24 6.24 7.24 8.24 9.24 10.24 11.24 12.24 13.24 14.24 15.24 16.24

Discount Factor 0.98 0.89 0.81 0.73 0.67 0.61 0.55 0.50 0.46 0.41 0.38 0.34 0.31 0.28 0.26 0.23 0.21

PV of BELVIQ Free Cash Flow $0 $0 $81 $40 $7 $39 $12 $35 $15 $33 $16 $35 $16 $16 $1 $1 $1

Discount Rate 10%


Final year FCF $0

Terminal Value $0

Discount Factor







BELVIQ NPV - EU $0.74 Source: Cowen and Company



BELVIQ NPV analysis – South Korea/Taiwan


Total South Korean Sales - - 2.1 4.6 6.6 8.8 19.9 24.5 33.1 34.8 40.7 42.8 45.0 47.4 49.9 50.0 50.1

Total Taiwan Sales - - 1.0 2.2 3.2 4.2 9.6 11.7 15.9 16.7 19.6 20.6 21.7 22.9 24.1 24.1 24.2

Total South Korea/Taiwan Sales - - 3.1 6.7 9.8 13.1 29.5 36.2 49.0 51.5 60.3 63.4 66.8 70.3 73.9 74.1 74.3

Total revenue on South Korean sales to ARNA - - 0.7 1.6 2.4 3.3 8.0 10.0 13.9 14.7 17.3 18.3 19.3 20.3 21.4 21.5 21.5

Total revenue on Taiwan sales to ARNA - - 0.5 1.0 1.4 1.9 4.3 5.3 7.2 7.5 8.8 9.3 9.8 10.3 10.8 10.9 10.9

Total SK/Taiwan revenues to ARNA - - 1 3 4 5 12 15 21 22 26 28 29 31 32 32 32

COGS 0 0 1 1 1 2 2 3 3 3 3 4 4 4 4

Milestone payments received 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Tax adjusted EBIT 4 2 3 4 10 11 16 16 18 18 19 20 21 21 22

Tax rate 0% 0% 0% 5% 8% 15% 15% 20% 20% 25% 25% 25% 25% 25% 25%

BELVIQ free cash flow 0 0 4 2 3 4 10 11 16 16 18 18 19 20 21 21 22% y/y growth -46% 48% 34% 130% 15% 38% -1% 18% -1% 5% 5% 5% 0% 0%

Discount Period 0.24 1.24 2.24 3.24 4.24 5.24 6.24 7.24 8.24 9.24 10.24 11.24 12.24 13.24 14.24 15.24 16.24

Discount Factor 0.98 0.89 0.81 0.73 0.67 0.61 0.55 0.50 0.46 0.41 0.38 0.34 0.31 0.28 0.26 0.23 0.21

PV of BELVIQ Free Cash Flow $0 $0 $3 $2 $2 $3 $5 $6 $7 $7 $7 $6 $6 $6 $6 $5 $5

Discount Rate 10%


Final year FCF $0

Terminal Value $0

Discount Factor







BELVIQ NPV $0.25 Source: Cowen and Company

2) Arena’s pipeline ($0.21/share)

We believe that the market assigns minimal value to the company’s four pipeline compounds,

given their early stage of development and lack of clinical data: 1) temanogrel, an inverse

agonist of the serotonin 2A receptor, which has completed two Phase I trials and is being

developed in partnership with South Korean biopharma Ildong for treatment of thrombotic

diseases, 2) APD811, being developed for PAH, which has recently completed Phase I testing

in healthy volunteers and will be evaluated in a Phase II trial in 1Q14, 3) APD334, being

developed for autoimmune disease and currently in a Phase I trial in healthy volunteers, and 4)

APD371, which is currently in preclinical development. We believe that the value of this

pipeline: A) is very difficult to accurately quantify, and B) could increase or decrease

significantly, as more data become available. For the purposes of valuing these early stage

assets at this point, we have decided to assign them a total value of $50M.

3) Arena’s current cash position ($0.76/share)

Arena ended 2Q13 with $178.9M or $0.76/fully diluted share in cash.



ARNA Sum-of-the-Parts Analysis

BELVIQ NPV - US $2.62

BELVIQ NPV - EU $0.74

BELVIQ NPV - SK/Taiwan $0.25

Pipeline $0.21

Cash $0.76

Sum-of-the-parts value for ARNA $4.59 Source: Cowen and Company

BELVIQ Revenue Model

Obesity is a chronic condition that affects approximately one-third of the United States

population, and its prevalence has doubled over the past two decades. The CDC (―Health,

United States 2012,‖ National Center for Health Statistics 2013) estimates that 35.7% of US

adults are obese (35.5% of men and 35.8% of women). This represents 71.3M adults between

the ages of 18 and 64 (35.4M men and 35.9M women) who can technically be classified as

obese based on their BMI. We have used this group as the starting point in our estimation of

the addressable market for BELVIQ in the U.S.

The prevalence of obesity is slightly lower in the E.U., and according to a number of literature

sources, male and female obesity rates vary from 4% to 28% and 6% to 36%, respectively. In

our revenue model, we have assumed that 20% of adults are obese in the E.U. This

represents 61.9M adults between 18 and 64 years of age (30.7M men and 31.3M women).

Using similar assumptions, we estimate that there are approximately 6.2M obese adults in

South Korea (3.1M men and 3.1M women) and 2.9M obese adults in Taiwan (1.5M men and

1.4M women). We estimate that this is the patient population that would be eligible for

treatment with BELVIQ in the E.U., South Korea, and Taiwan.

Pricing, penetration rates and sales: Eisai has priced BELVIQ at an average monthly cost of

$199.50, and we have estimated that BELVIQ will be launched at a 25% discount to U.S.

pricing in the E.U., and at a 50% discount to U.S. pricing in South Korea and Taiwan. We

estimate that BELVIQ will be launched in 2015 in South Korea and Taiwan, and in mid-2016 in

the E.U. We have also assumed that the BELVIQ/Phentermine combination will be introduced

to the U.S. in 2018, and to South Korea and Taiwan in 2019.

Peak penetration in men between 18 and 64 years of age: We estimate that WW

BELVIQ + BELVIQ/Phentermine sales in men between 18 and 64 years of age could

be ~$70M in 2018, and that at 0.51%, 0.18%, 0.59%, and 0.59% penetrations in the

U.S., E.U., South Korea, and Taiwan, respectively, BELVIQ could reach peak WW

sales of $240M in 2026.

Peak penetration in women between 18 and 64 years of age: We have assumed

that penetration in women will be four times that of men, and we estimate that WW



BELVIQ + BELVIQ/Phentermine sales in women between 18 and 64 years of age

could be ~$290M in 2018, and that at 2.04%, 0.72%, 2.36%, and 2.36% penetrations

in the U.S., E.U., South Korea, and Taiwan, respectively, BELVIQ could reach peak

WW sales of $971M in 2026.

BELVIQ + BELVIQ/Phentermine revenue model ($MM) - US

BELVIQ+BELVIQ/Phentermine Revenue Model (US) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

US population 318,769,185 321,574,353 324,404,208 327,258,965 330,138,844 333,044,066 335,974,853 338,931,432 341,914,029 344,922,872 347,958,193 351,020,225 354,109,203 357,225,364 360,368,948 363,540,194 366,739,348 369,966,654

Population growth 0.88% 0.88% 0.88% 0.88% 0.88% 0.88% 0.88% 0.88% 0.88% 0.88% 0.88% 0.88% 0.88% 0.88% 0.88% 0.88% 0.88% 0.88%

Total men 155,453,282 156,821,271 158,201,298 159,593,469 160,997,892 162,414,673 163,843,923 165,285,749 166,740,264 168,207,578 169,687,805 171,181,057 172,687,451 174,207,100 175,740,123 177,286,636 178,846,758 180,420,610

# of men between 18 and 64 years old 98,739,136 99,608,040 100,484,591 101,368,855 102,260,901 103,160,797 104,068,612 104,984,416 105,908,279 106,840,272 107,780,466 108,728,934 109,685,749 110,650,984 111,624,712 112,607,010 113,597,951 114,597,613

% of men between 18 and 64 years old 63.5% 63.5% 63.5% 63.5% 63.5% 63.5% 63.5% 63.5% 63.5% 63.5% 63.5% 63.5% 63.5% 63.5% 63.5% 63.5% 63.5% 63.5%

% of men between 18 and 64 years old that are obese 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5% 35.5%

# of men between 18 and 64 years old that are obese 35,052,393 35,360,854 35,672,030 35,985,944 36,302,620 36,622,083 36,944,357 37,269,468 37,597,439 37,928,297 38,262,066 38,598,772 38,938,441 39,281,099 39,626,773 39,975,488 40,327,273 40,682,153

BELVIQ penetration in men 0.025% 0.05% 0.07% 0.09% 0.11% 0.04% 0.03% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.00% 0.00% 0.00%

# of obese men treated with BELVIQ 8,840 17,836 25,190 32,672 40,284 14,778 11,181 7,519 7,586 7,652 7,720 7,788 7,856 7,925 800 403 407

BELVIQ/Phentermine penetration in men 0.15% 0.20% 0.25% 0.33% 0.40% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%

# of obese men treated with BELVIQ/Phentermine 55,417 74,539 93,994 125,163 153,048 135,096 136,285 137,484 138,694 139,914 141,145 142,388

Average # of prescriptions (Rx)/patient 4.5 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6

% compliance 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70%

Average cost/prescription (Rx) $200 $203 $210 $220 $231 $243 $255 $268 $281 $295 $310 $325 $341 $358 $376 $376 $376

% price increase 2% 3% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 0% 0% 0%

Discount offered 35% 30% 22% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20%

BELVIQ - total US Sales in men ($MM) $0 $4 $11 $17 $24 $31 $12 $10 $7 $7 $8 $8 $9 $9 $10 $1 $1 $1

BELVIQ/Phentermine - total US Sales in men ($MM) $0 $0 $0 $0 $0 $0 $45 $64 $84 $118 $152 $141 $149 $158 $167 $177 $179 $180

Total women 160,262,826 161,673,138 163,095,862 164,531,106 165,978,979 167,439,594 168,913,063 170,399,498 171,899,013 173,411,725 174,937,748 176,477,200 178,030,199 179,596,865 181,177,318 182,771,678 184,380,069 186,002,613

# of women between 18 and 64 years old 99,491,200 100,366,722 101,249,949 102,140,949 103,039,789 103,946,539 104,861,269 105,784,048 106,714,948 107,654,039 108,601,395 109,557,087 110,521,189 111,493,776 112,474,921 113,464,700 114,463,190 115,470,466

% of women between 18 and 64 years old 62.1% 62.1% 62.1% 62.1% 62.1% 62.1% 62.1% 62.1% 62.1% 62.1% 62.1% 62.1% 62.1% 62.1% 62.1% 62.1% 62.1% 62.1%

% of women between 18 and 64 years old that are obese 35.8% 35.8% 35.8% 35.8% 35.8% 35.8% 35.8% 35.8% 35.8% 35.8% 35.8% 35.8% 35.8% 35.8% 35.8% 35.8% 35.8% 35.8%

# of women between 18 and 64 years old that are obese 35,617,849 35,931,287 36,247,482 36,566,460 36,888,245 37,212,861 37,540,334 37,870,689 38,203,951 38,540,146 38,879,299 39,221,437 39,566,586 39,914,772 40,266,022 40,620,363 40,977,822 41,338,427

BELVIQ penetration in women 0.1% 0.20% 0.28% 0.36% 0.44% 0.16% 0.12% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.01% 0.00% 0.00%

# of obese women treated with BELVIQ 35,931 72,495 102,386 132,798 163,737 60,065 45,445 30,563 30,832 31,103 31,377 31,653 31,932 32,213 3,250 1,639 1,654

BELVIQ/Phentermine penetration in women 0.60% 0.80% 1.00% 1.32% 1.60% 1.40% 1.40% 1.40% 1.40% 1.40% 1.40% 1.40%

# of obese women treated with BELVIQ/Phentermine 225,242 302,966 382,040 508,730 622,069 549,100 553,932 558,807 563,724 568,685 573,690 578,738

Average # of prescriptions (Rx)/patient 4.5 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6

% compliance 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70%

Average cost/prescription (Rx) $200 $203 $210 $220 $231 $243 $255 $268 $281 $295 $310 $325 $341 $358 $376 $376 $376

% price increase 2% 3% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 0% 0% 0%

Discount offered 35% 30% 22% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20%

BELVIQ - total US Sales in women ($MM) $0 $15 $43 $70 $98 $127 $49 $39 $27 $29 $31 $33 $35 $37 $39 $4 $2 $2

BELVIQ/Phentermine - total US Sales in women ($MM) $0 $0 $0 $0 $0 $0 $184 $259 $343 $480 $616 $571 $605 $641 $679 $719 $726 $732

BELVIQ - total US Sales ($MM) $0 $18 $54 $88 $122 $158 $61 $48 $34 $36 $38 $41 $43 $46 $48 $5 $3 $3

BELVIQ/Phentermine - total US Sales ($MM) $0 $0 $0 $0 $0 $0 $229 $323 $428 $598 $768 $712 $754 $799 $846 $896 $904 $912

BELVIQ + BELVIQ/Phentermine- total US Sales ($MM) $0 $18 $54 $88 $122 $158 $290 $372 $462 $634 $806 $753 $797 $844 $894 $901 $907 $915

Total revenue on US sales to ARNA $0 $6 $17 $28 $39 $50 $92 $120 $151 $209 $269 $250 $266 $283 $301 $303 $305 $308




BELVIQ revenue model ($MM) – EU

BELVIQ Revenue Model (EU) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

EU population 504,832,526 505,337,358 505,842,695 506,348,538 506,854,887 507,361,742 507,869,103 508,376,972 508,885,349 509,394,235 509,903,629 510,413,533 510,923,946 511,434,870 511,946,305 512,458,251 512,970,710 513,483,680


Total men 241,263,217 241,504,480 241,745,984 241,987,730 242,229,718 242,471,948 242,714,420 242,957,134 243,200,091 243,443,291 243,686,735 243,930,421 244,174,352 244,418,526 244,662,945 244,907,608 245,152,515 245,397,668





BELVIQ penetration in men 0.02% 0.04% 0.06% 0.08% 0.10% 0.12% 0.14% 0.15% 0.16% 0.17% 0.18% 0.02% 0.01% 0.01%

# of obese men treated with BELVIQ - - - 6,154 12,321 18,500 25,000 30,895 37,111 43,339 46,481 49,629 52,784 55,945 5,600 2,803 2,806

Average # of prescriptions (Rx)/patient - 6 6 6 6 6 6 6 6 6 6 6 6 6 6

% compliance 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70%

Average cost/prescription (Rx) $158 $166 $174 $183 $192 $202 $212 $222 $233 $245 $257 $257 $257 $257

% price increase 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 0% 0% 0% 0%

Discount offered 25% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20%

BELVIQ - total EU Sales in men ($MM) $0 $0 $0 $0 $3 $7 $11 $15 $20 $25 $31 $35 $39 $43 $48 $5 $2 $2

Total women 251,591,877 251,843,469 252,095,312 252,347,408 252,599,755 252,852,355 253,105,207 253,358,312 253,611,671 253,865,282 254,119,148 254,373,267 254,627,640 254,882,268 255,137,150 255,392,287 255,647,679 255,903,327





BELVIQ penetration in women 0.08% 0.16% 0.24% 0.32% 0.40% 0.48% 0.56% 0.60% 0.64% 0.68% 0.72% 0.07% 0.04% 0.04%

# of obese women treated with BELVIQ 25,090 50,231 75,421 101,921 125,954 151,296 176,688 189,498 202,333 215,194 228,080 22,831 11,427 11,438

Average # of prescriptions (Rx)/patient 6 6 6 6 6 6 6 6 6 6 6 6 6 6

% compliance 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70%

Average cost/prescription (Rx) $158 $166 $174 $183 $192 $202 $212 $222 $233 $245 $257 $257 $257 $257

% price increase 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 0% 0% 0% 0%

Discount offered 25% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20%

BELVIQ - total EU Sales in women ($MM) $0 $0 $0 $0 $12 $28 $44 $63 $81 $103 $126 $142 $159 $177 $197 $20 $10 $10

BELVIQ - total EU Sales ($MM) $0 $0 $0 $0 $16 $35 $55 $78 $101 $128 $157 $176 $198 $221 $246 $25 $12 $12

Total revenue on EU sales to ARNA $0 $0 $0 $0 $6 $13 $20 $28 $36 $46 $56 $63 $71 $79 $88 $9 $4 $4




BELVIQ + BELVIQ/Phentermine revenue model ($MM) – South Korea

BELVIQ +BELVIQ/Phentermine Revenue Model (SK) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

South Korea population 49,060,054 49,160,137 49,260,423 49,360,915 49,461,611 49,562,513 49,663,620 49,764,934 49,866,454 49,968,182 50,070,117 50,172,260 50,274,611 50,377,172 50,479,941 50,582,920 50,686,109 50,789,509


Total men 24,538,235 24,588,293 24,638,454 24,688,716 24,739,081 24,789,549 24,840,119 24,890,793 24,941,570 24,992,451 25,043,436 25,094,525 25,145,717 25,197,015 25,248,417 25,299,923 25,351,535 25,403,252





BELVIQ penetration in men 0.04% 0.08% 0.11% 0.14% 0.10% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%

# of obese men treated with BELVIQ 1,255 2,514 3,464 4,418 3,162 1,584 1,587 1,591 1,594 1,597 1,600 1,604 1,607 1,610 1,614

BELVIQ/Phentermine penetration in men 0.20% 0.30% 0.40% 0.40% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45%

# of obese men treated with BELVIQ/Phentermine - - - - - - - 6,324 9,505 12,700 12,725 14,345 14,375 14,404 14,433 14,463 14,492 14,522

Average # of prescriptions (Rx)/patient 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6

% compliance 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70%

Average cost/prescription (Rx) $105 $110 $116 $121 $127 $134 $140 $147 $155 $163 $171 $179 $188 $188 $188

% price increase 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 0% 0% 0%

Discount offered 22% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20%

BELVIQ - total South Korean Sales in men ($MM) $0 $0 $0 $0 $1 $1 $2 $1 $1 $1 $1 $1 $1 $1 $1 $1 $1 $1

BELVIQ/Phentermine - total South Korean Sales in men ($MM) $0 $0 $0 $0 $0 $0 $0 $3 $4 $6 $6 $7 $8 $8 $9 $9 $9 $9

Total women 24,521,819 24,571,843 24,621,970 24,672,199 24,722,530 24,772,964 24,823,501 24,874,141 24,924,884 24,975,731 25,026,681 25,077,736 25,128,894 25,180,157 25,231,525 25,282,997 25,334,574 25,386,257





BELVIQ penetration in women 0.16% 0.32% 0.44% 0.56% 0.40% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%

# of obese women treated with BELVIQ 4,901 9,823 13,534 17,260 12,353 6,189 6,202 6,215 6,227 6,240 6,253 6,265 6,278 6,291 6,304

BELVIQ/Phentermine penetration in women 0.80% 1.20% 1.60% 1.60% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80%

# of obese women treated with BELVIQ/Phentermine - - - - - - - 24,707 37,136 49,616 49,717 56,046 56,160 56,275 56,389 56,504 56,620 56,735


% compliance 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70%


% price increase 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 0% 0% 0%


BELVIQ - total South Korean Sales in women ($MM) $0 $0 $0 $2 $4 $5 $7 $5 $3 $3 $3 $3 $3 $4 $4 $4 $4 $4

BELVIQ/Phentermine - total South Korean Sales in women ($MM) $0 $0 $0 $0 $0 $0 $0 $11 $17 $23 $25 $29 $31 $32 $34 $36 $36 $36

BELVIQ - total South Korean Sales ($MM) $0 $0 $0 $2 $5 $7 $9 $7 $3 $4 $4 $4 $4 $5 $5 $5 $5 $5

BELVIQ/Phentermine - total South Korean Sales ($MM) $0 $0 $0 $0 $0 $0 $0 $13 $21 $29 $31 $37 $39 $41 $43 $45 $45 $45

BELVIQ + BELVIQ/Phentermine- total South Korea Sales ($MM) $0 $0 $0 $2 $5 $7 $9 $20 $24 $33 $35 $41 $43 $45 $47 $50 $50 $50

Total revenue on South Korean sales to ARNA $0 $0 $0 $1 $2 $2 $3 $8 $10 $14 $15 $17 $18 $19 $20 $21 $21 $22




BELVIQ + BELVIQ/Phentermine revenue model ($MM) – Taiwan

BELVIQ +BELVIQ/Phentermine Revenue Model (Taiwan) 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

Taiwan population 23,299,716 23,362,625 23,425,704 23,488,954 23,552,374 23,615,965 23,679,728 23,743,664 23,807,772 23,872,053 23,936,507 24,001,136 24,065,939 24,130,917 24,196,070 24,261,400 24,326,905 24,392,588


Total men 11,699,718 11,731,307 11,762,981 11,794,741 11,826,587 11,858,519 11,890,537 11,922,641 11,954,833 11,987,111 12,019,476 12,051,928 12,084,469 12,117,097 12,149,813 12,182,617 12,215,510 12,248,492





BELVIQ penetration in men 0.04% 0.08% 0.11% 0.14% 0.10% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%

# of obese men treated with BELVIQ - - 599 1,202 1,657 2,115 1,515 759 761 763 766 768 770 772 774 776 778

BELVIQ/Phentermine penetration in men 0.20% 0.30% 0.40% 0.40% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45%

# of obese men treated with BELVIQ/Phentermine - - - - - - - 3,029 4,556 6,091 6,108 6,890 6,908 6,927 6,945 6,964 6,983 7,002

Average # of prescriptions (Rx)/patient - - 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6

% compliance 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70%


% price increase 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 0% 0% 0%


BELVIQ - total Taiwan Sales in men ($MM) $0 $0 $0 $0 $0 $1 $1 $1 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

BELVIQ/Phentermine - total Taiwan Sales in men ($MM) $0 $0 $0 $0 $0 $0 $0 $1 $2 $3 $3 $4 $4 $4 $4 $4 $4 $4

Total women 11,725,987 11,757,647 11,789,393 11,821,224 11,853,141 11,885,145 11,917,235 11,949,411 11,981,675 12,014,025 12,046,463 12,078,988 12,111,602 12,144,303 12,177,093 12,209,971 12,242,938 12,275,994





BELVIQ penetration in women 0.16% 0.32% 0.44% 0.56% 0.40% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%

# of obese women treated with BELVIQ 2,348 4,709 6,493 8,286 5,935 2,975 2,983 2,991 2,999 3,008 3,016 3,024 3,032 3,040 3,048

BELVIQ/Phentermine penetration in women 0.00% 0.80% 1.20% 1.60% 1.60% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80% 1.80%

# of obese women treated with BELVIQ/Phentermine - 11,869 17,852 23,867 23,931 26,995 27,068 27,141 27,214 27,288 27,362 27,435


% compliance 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70% 70%


% price increase 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 0% 0% 0%


BELVIQ - total Taiwan Sales in women ($MM) $0 $0 $0 $1 $2 $3 $3 $3 $1 $1 $1 $2 $2 $2 $2 $2 $2 $2

BELVIQ/Phentermine - total Taiwan Sales in women ($MM) $0 $0 $0 $0 $0 $0 $0 $5 $8 $11 $12 $14 $15 $16 $16 $17 $17 $17

BELVIQ - total Taiwan Sales ($MM) $0 $0 $0 $1 $2 $3 $4 $3 $2 $2 $2 $2 $2 $2 $2 $2 $2 $2

BELVIQ/Phentermine - total Taiwan Sales ($MM) $0 $0 $0 $0 $0 $0 $0 $6 $10 $14 $15 $18 $19 $20 $21 $22 $22 $22

BELVIQ + BELVIQ/Phentermine- total Taiwan Sales ($MM) $0 $0 $0 $1 $2 $3 $4 $10 $12 $16 $17 $20 $21 $22 $23 $24 $24 $24

% increase 116% 45% 34% 126% 23% 35% 5% 17% 5% 5% 5% 5% 0% 0%

Total revenue on Taiwan sales to ARNA $0 $0 $0 $0 $1 $1 $2 $4 $5 $7 $8 $9 $9 $10 $10 $11 $11 $11




Arena: P&L and Balance Sheet

Income statement: For 2012, Arena reported a net loss of $88.3M, or ($0.45) per share,

compared to a loss of $111.5M, or ($0.80) per share, in 2011. Total operating expenses in

2012 were $81M, compared to $87.4M in 2011. R&D expenses in 2012 were $54.1M,

compared to $58.7M in 2011, while G&A expenses were $26.2M, compared to $26.2M in

2011.

In 2Q13, the most recently reported quarter, Arena reported a net profit of $40.1M, or $0.18

per share, compared to a net loss of $22.1M, or ($0.12) per share, in 2Q12. The profit was

primarily due to the $65M milestone payment received from Eisai in June 2013 for the delivery

of launch supplies and U.S. launch. Total operating expenses for 2Q13 were $27.4M,

compared to the $19.5M spent in 2Q12. R&D expenses were $18.8M in 2Q13, compared to

the $14.1M spent in 2Q12, while G&A expenses were $8.6M in 2Q13, compared to the $5.2M

spent in 2Q12.

2013 financial guidance: Arena expects 2013 R&D expenses to be in the range of $70-$78M,

including non-cash expenses of approximately $7M. G&A expenses are expected to be in the

range of $28-$34M, including non-cash expenses of approximately $6M.

Balance sheet: Arena ended 2Q13 with $178.9M or $0.76/fully diluted share in cash.

Share count: As of August 2013, the company had 218.2M common shares, 2M warrants,

and 14.6M options outstanding, bringing the fully diluted number of shares to ~234.8M.

Options and Warrants Outstanding (MM)

Warrants OutstandingWeighted

AverageExercise PriceExpiration Date

August 2008 Series B Warrants 2.0 $4.34 8/14/2015

Total Warrants Outstanding 2.0 6.23

Total Options Outstanding 14.6 $4.88

Total Options and Warrants outstanding 16.5

Source: Cowen and Company, SEC Filings

Manufacturing plant in Switzerland provides 10-year tax-break: In 2008, Arena’s Swiss

subsidiary, Arena GmbH, purchased a plant in Switzerland from Siegfried, a company which

provides custom drug development services, including drug substances and drug

manufacturing, for $38.7M ($30.7M in cash and 1.5M shares valued at $8M). Arena plans to

manufacture BELVIQ at this facility and sell it to its partners. This subsidiary has been granted

a conditional incentive tax holiday for its operations in Switzerland, which Arena expects will

exempt it from the majority of potential Swiss income taxes. This tax holiday will continue for a

period of up to 10 years, not to extend beyond December 31, 2022. Arena has guided that, as



a result of this tax holiday, it expects to pay lower overall taxes during that period, at a tax rate

in the range of 15-20%.

Arena: Quarterly P&L ($MM)

($MM) 2009A 2010A 2011A Q1:12A Q2:12A Q3:12A Q4:12A 2012A Q1:13A Q2:13A Q3:13E Q4:13E 2013E Q1:14E Q2:14E Q3:14E Q4:14E 2014E 2015E

Total revenue on US sales to ARNA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3 1.9 2.6 5.8 3.2 3.8 4.6 5.5 17.0 27.6

Total revenue on EU sales to ARNA - probability-adjusted 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total revenue on SK sales to ARNA - probability-adjusted 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6

Total revenue onTaiwan sales to ARNA - probability-adjusted 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4

Total revenue on sales to ARNA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3 1.9 2.6 5.8 3.2 3.8 4.6 5.5 17.0 28.5

Manufacturing services 6.6 7.1 5.3 1.3 1.0 0.6 0.9 3.8 0.8 1.0 0.8 0.8 3.2 0.9 0.9 0.9 0.9 3.6 0.0

Milestones/License Fees - Eisai/Others 3.8 9.6 7.4 0.9 20.9 0.9 0.9 23.6 1.5 66.5 1.5 2.0 71.5 1.5 1.5 1.5 11.5 16.0 16.0

Milestones/License Fees - EU partnership 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 50.0

Milestones/License Fees - Ildong 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.2 0.1 0.2 0.2 0.2 0.6 0.2 0.2 0.2 0.2 0.6 3.0

Milestones/License Fees - CYB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.2 0.2

Total Revenues 10.4 16.6 12.7 2.2 22.0 1.5 1.9 27.6 2.4 68.9 4.3 5.5 81.1 5.7 6.3 7.2 18.2 37.5 97.7

Cost of Goods Sold 6.5 7.4 8.1 0.8 0.7 1.4 0.8 3.7 2.1 1.6 1.3 1.5 6.5 1.8 1.9 2.2 2.4 8.3 5.4

Gross Profit 3.9 9.2 4.6 1.4 21.3 0.1 1.1 23.9 0.3 67.3 3.0 4.0 74.5 4.0 4.4 5.1 15.8 29.2 92.3

R&D 110.2 75.5 58.7 14.5 14.1 11.6 13.9 54.1 14.0 18.8 20.0 22.0 74.8 14.0 14.0 14.0 14.0 56.0 57.1

SG&A 25.2 27.9 24.2 6.4 5.2 7.4 7.3 26.2 7.3 8.6 8.7 8.8 33.4 8.7 8.8 8.7 8.8 35.0 35.7

Total Operating Expenses 142.2 105.6 87.4 21.0 19.5 19.2 21.4 81.0 21.3 27.4 28.9 31.0 108.5 22.9 23.0 22.9 23.0 91.7 93.5

% Revenues 1369.4% 635.4% 687.3% 293.7% 133.9% 244.7% 95.7%

Operating Income (138.4) (96.4) (82.8) (19.6) 1.9 (19.1) (20.3) (57.1) (21.0) 39.9 (25.9) (27.0) (34.0) (18.9) (18.6) (17.8) (7.2) (62.5) (1.2)

% Revenues -42.0% -166.8% -1.2%

Total Non-Operating Income (14.8) (28.2) (28.7) (9.8) (24.0) 3.6 (1.0) (31.2) 2.1 0.2 (1.8) (1.8) (1.3) (1.8) (1.8) (1.8) (1.8) (7.2) (7.2)

Pretax Income (153.2) (124.5) (111.5) (29.4) (22.1) (15.5) (21.3) (88.3) (18.9) 40.1 (27.7) (28.8) (35.3) (20.7) (20.4) (19.6) (9.0) (69.7) (8.4)

Income tax expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Tax Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Net Income - Operations (153.2) (124.5) (111.5) (29.4) (22.1) (15.5) (21.3) (88.3) (18.9) 40.1 (27.7) (28.8) (35.3) (20.7) (20.4) (19.6) (9.0) (69.7) (8.4)

Non-Recurring Gains (Losses) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Income - Reported (153.2) (124.5) (111.5) (29.4) (22.1) (15.5) (21.3) (88.3) (18.9) 40.1 (27.7) (28.8) (35.3) (20.7) (20.4) (19.6) (9.0) (69.7) (8.4)

Basic EPS ($1.82) ($1.14) ($0.80) ($0.18) ($0.12) ($0.07) ($0.10) ($0.45) ($0.09) $0.18 ($0.13) ($0.13) ($0.16) ($0.08) ($0.08) ($0.08) ($0.04) ($0.28) ($0.03)

Diluted EPS ($1.82) ($1.14) ($0.80) ($0.18) ($0.12) ($0.07) ($0.10) ($0.45) ($0.09) $0.18 ($0.13) ($0.13) ($0.16) ($0.08) ($0.08) ($0.08) ($0.04) ($0.28) ($0.03)

Shares outstanding (basic) 84.34 109.6 139.2 164.2 190.3 213.9 217.3 196.4 217.5 217.9 219.3 220.4 218.8 246.5 247.8 249.0 250.3 248.4 255.3

Shares outstanding (diluted) 123.52 150.1 181.6 205.0 202.5 233.9 234.7 219.1 236.3 224.5 234.8 235.9 232.9 262.1 263.4 264.7 266.1 264.1 271.4

Source: Cowen and Company, Arena Pharmaceuticals

Arena: Annual P&L ($MM)

($MM) 2009A 2010A 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

Total revenue on US sales to ARNA 0.0 0.0 0.0 0.0 5.8 17.0 27.6 38.5 49.9 92.3 120.1 150.9 209.5 269.1 249.7 265.7 282.7 300.7 303.2 305.1 308.0

Total revenue on EU sales to ARNA - probability-adjusted 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.8 6.3 9.9 14.0 18.2 23.0 28.2 31.7 35.6 39.7 44.2 4.4 2.2 2.2

Total revenue on SK sales to ARNA - probability-adjusted 0.0 0.0 0.0 0.0 0.0 0.0 0.6 1.3 1.9 2.6 6.4 8.0 11.1 11.7 13.8 14.6 15.4 16.3 17.2 17.2 17.2

Total revenue onTaiwan sales to ARNA - probability-adjusted 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.8 1.1 1.5 3.4 4.2 5.7 6.0 7.1 7.4 7.8 8.2 8.7 8.7 8.7

Total revenue on sales to ARNA 0.0 0.0 0.0 0.0 5.8 17.0 28.5 43.4 59.2 106.3 144.0 181.3 249.3 315.0 302.3 323.3 345.7 369.4 333.5 333.2 336.2

Manufacturing services 6.6 7.1 5.3 3.8 3.2 3.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Milestones/License Fees - Eisai/Others 3.8 9.6 7.4 23.6 71.5 16.0 16.0 71.0 6.0 55.0 0.0 55.0 0.0 100.0 0.0 0.0 0.0 150.0 0.0 0.0 0.0

Milestones/License Fees - EU partnership 0.0 0.0 0.0 0.0 0.0 0.0 50.0 25.0 0.0 25.0 0.0 25.0 0.0 25.0 0.0 37.5 37.5 0.0 0.0 0.0 0.0

Milestones/License Fees - Ildong 0.0 0.0 0.0 0.2 0.6 0.6 3.0 0.6 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Milestones/License Fees - CYB 0.0 0.0 0.0 0.0 0.0 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.0 0.0 0.0 0.0 0.0 0.0

Total Revenues 10.4 16.6 12.7 27.6 81.1 37.5 97.7 140.2 66.0 186.5 144.2 261.5 249.5 440.2 302.5 360.8 383.2 519.4 333.5 333.2 336.2

Cost of Goods Sold 6.5 7.4 8.1 3.7 6.5 8.3 5.4 8.1 11.0 16.4 21.7 27.1 36.9 46.3 44.4 47.3 50.4 53.7 48.6 48.6 49.0

Gross Profit 3.9 9.2 4.6 23.9 74.5 29.2 92.3 132.1 55.0 170.1 122.4 234.4 212.6 393.9 258.1 313.5 332.8 465.8 284.8 284.6 287.2

R&D 110.2 75.5 58.7 54.1 74.8 56.0 57.1 58.2 58.6 59.0 59.4 53.8 50.0 47.5 45.8 44.8 44.2 26.5 15.9 9.5 5.7

SG&A 25.2 27.9 24.2 26.2 33.4 35.0 35.7 36.4 37.1 37.9 38.6 39.4 40.2 41.0 41.8 42.7 43.5 44.4 45.3 46.2 47.1

Total Operating Expenses 142.2 105.6 87.4 81.0 108.5 91.7 93.5 95.4 96.5 97.6 98.7 93.9 90.9 89.2 88.3 88.1 88.4 71.6 61.9 55.7 52.8

% Revenues 1369.4% 635.4% 687.3% 293.7% 133.9% 244.7% 95.7% 68.0% 146.1% 52.3% 68.5% 35.9% 36.4% 20.3% 29.2% 24.4% 23.1% 13.8% 18.6% 16.7% 15.7%

Operating Income (138.4) (96.4) (82.8) (57.1) (34.0) (62.5) (1.2) 36.7 (41.5) 72.6 23.7 140.5 121.7 304.8 169.7 225.4 244.4 394.2 222.9 228.9 234.3

% Revenues -42.0% -166.8% -1.2% 26.2% -62.8% 38.9% 16.4% 53.7% 48.8% 69.2% 56.1% 62.5% 63.8% 75.9% 66.9% 68.7% 69.7%

Total Non-Operating Income (14.8) (28.2) (28.7) (31.2) (1.3) (7.2) (7.2) (7.2) (7.2) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0

Pretax Income (153.2) (124.5) (111.5) (88.3) (35.3) (69.7) (8.4) 29.5 (48.7) 72.6 23.7 140.5 121.7 304.8 169.7 225.4 244.4 394.2 222.9 228.9 237.3

Income tax expense 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.6 1.9 21.1 18.3 61.0 33.9 56.3 61.1 98.5 55.7 57.2 59.3

Tax Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5.0% 8.0% 15.0% 15.0% 20.0% 20.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%

Net Income - Operations (153.2) (124.5) (111.5) (88.3) (35.3) (69.7) (8.4) 29.5 (48.7) 68.9 21.8 119.4 103.5 243.8 135.8 169.0 183.3 295.6 167.2 171.7 178.0

Non-Recurring Gains (Losses) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 2.0 3.0 4.0

Net Income - Reported (153.2) (124.5) (111.5) (88.3) (35.3) (69.7) (8.4) 29.5 (48.7) 68.9 21.8 119.4 103.5 243.8 135.8 169.0 183.3 296.6 169.2 174.7 182.0

Basic EPS ($1.82) ($1.14) ($0.80) ($0.45) ($0.16) ($0.28) ($0.03) $0.11 ($0.18) $0.25 $0.08 $0.42 $0.36 $0.83 $0.45 $0.55 $0.59 $0.93 $0.52 $0.53 $0.54

Diluted EPS ($1.82) ($1.14) ($0.80) ($0.45) ($0.16) ($0.28) ($0.03) $0.11 ($0.18) $0.24 $0.07 $0.40 $0.34 $0.78 $0.43 $0.52 $0.55 $0.88 $0.49 $0.50 $0.51

Shares outstanding (basic) 84.34 109.6 139.2 196.4 218.8 248.4 255.3 260.4 265.6 270.9 276.3 281.8 287.5 293.2 299.1 305.1 311.2 317.4 323.7 330.2 336.8

Shares outstanding (diluted) 123.52 150.1 181.6 219.1 232.9 264.1 271.4 276.8 282.3 288.0 293.7 299.6 305.6 311.7 318.0 324.3 330.8 337.4 344.2 351.1 358.1




Arena’s BELVIQ Is Approved and Now Available in U.S.

After completing a three-trial Phase III program, in June 2012, Arena’s BELVIQ became the

first new weight loss drug to be approved by the FDA in 13 years. BELVIQ is indicated, as an

adjunct to low-calorie diet and exercise, for chronic weight management in adults with initial

BMI of 30 kg/m2 (obese), or ≥ 27 kg/m2 (overweight) in the presence of at least one weight-

related comorbid condition, such as hypertension, dyslipidemia, or type 2 diabetes. The

recommended dose of BELVIQ is 10 mg administered orally twice daily, taken with or without

food. Response to BELVIQ should be evaluated after 12 weeks, and treatment should be

discontinued at that time if the patient has achieved less than 5% weight loss.

DEA Schedule and Launch: The FDA recommended that BELVIQ be classified by the DEA

as a Schedule IV drug. On May 7, 2013, Arena announced that the DEA designation of

BELVIQ as a Schedule IV drug had been filed by the Office of the Federal Register for public

inspection. On June 7, 2013 BELVIQ was commercially launched in the U.S. and became

available through retail pharmacies on June 11, 2013.

A Look at the U.S. BELVIQ Launch

Eisai launched BELVIQ using a primary care sales force of 200 sales reps who previously

detailed Aricept and AcipHex, initially targeting 20,000 to 30,000 physicians (PCPs,

cardiologists, and endocrinologists) who actively treat obesity. With this sales force, Eisai

generated Aricept and AcipHex U.S. sales of $2.9B, $3B, $2.6B, $844M, and $636M in 2008,

2009, 2010, 2011, and 2012 respectively. In addition, according to Arena, Eisai will utilize

approximately 50 dedicated managed markets specialists and 3 health economists to focus on

BELVIQ’s reimbursement. Based on discussions with the company, this is the initial level of

detailing effort Eisai is putting behind BELVIQ, and the possibility that it may be increased, if

needed, is on the table.

In its 2Q13 earnings call, Arena disclosed that there were 12,500 total prescriptions filled in the

first six weeks of BELVIQ’s launch (between 6/11/2013 and 7/19/2013). Eisai has reported that

~3,900 physicians, the majority of whom are primary care physicians, have already started

prescribing BELVIQ.



BELVIQ Weekly NRx Data (IMS and Symphony Health)

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Belviq Weekly NRx

IMS data (NRx)

SH data (NRx)

Source: Cowen and Company, IMS and Symphony Health

BELVIQ Weekly TRx Data (IMS and Symphony Health)

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Belviq Weekly TRx

IMS data (TRx)

SH data (TRx)

Source: Cowen and Company, IMS and Symphony Health

BELVIQ Sales: For 2Q13, Eisai disclosed gross revenue of $10M from BELVIQ sales,

corresponding to ~50,000 bottles of BELVIQ shipped to its distributors (average WAC ~$200).

The net sales were ~$4.2M, and thus Arena recognized $1.3M in revenues, given the 31.5%

transfer price, from BELVIQ sales.

BELVIQ Savings Program: Eisai has a 15-Day free trial voucher program in which patients

can receive 15 days of BELVIQ for free. Also, a Savings Card is offered, through which

patients receive up to $75 off each month for 12 months ($75 off for cash-pay patients; up to

$75 off for patients with insurance coverage having an initial $50 or more co-pay each month).

Reimbursement Efforts: According to Arena, Eisai has approximately 50 reimbursement

specialists and 3 healthcare economists working on reimbursement for BELVIQ. Eisai’s stated



goal is to improve reimbursement from the current ~ 30% to as much as 50% by the end of its

fiscal year (March 2014).

Consumer Launch: In September 2013, Arena reported that Eisai’s US launch campaign for

BELVIQ has entered its consumer phase. Full page announcements were placed in major US

magazines beginning in September, which are intended to educate consumers about BELVIQ

as a weight loss treatment option. Also, Eisai has launched the BELIEVE EVERYDAY

SUPPORT program for BELVIQ, which provides free support and savings, and includes an

online portal. The program includes: a monthly savings card, one-year membership to the

―Lose It!‖ app for calorie- and activity-tracking, nutrition information and meal planning tool, and

motivational tips to help sustain weight loss efforts.

BELVIQ’s (Lorcaserin) Mechanism of Action

BELVIQ (lorcaserin) is a selective serotonin (5-HT) 2C receptor agonist. The 5-HT2C receptor

subtype appears to be involved in the central regulation of satiety, as validated in both animal

models and human studies. It is believed that lorcaserin decreases food consumption and

promotes satiety by selectively activating serotonin 2C receptors in the brain.

Notably, the serotonergic agonist fenfluramine was historically one of the most successful

weight loss drugs ever used, but was withdrawn from the market in 1997 due to cardiac

toxicity, considered to result from the compound’s lack of selectivity. In addition to being an

agonist of the 5-HT2C receptor, the action of fenfluramine on 5-HT2B receptors in the heart led

to valvular disorders.

In contrast, BELVIQ features multi-fold selectivity for the 5-HT2C receptor compared with the

5-HT2B receptor, and also shows relatively low activity at other serotonin receptor subtypes.

High-dose studies in animals over several months have not demonstrated appreciable

cardiovascular changes with lorcaserin treatment.

Lorcaserin Potency (EC50) and Binding Affinity (Ki) to Human 5-HT2A, 5-HT2B, and 5-HT2C Receptor Subtypes

Serotonin Receptor Subtype EC50, nM Ki, nM

5-HT 2C 39 13

5-HT 2B 2380 147

5-HT 2A 553 92

Source: Cowen and Company, BELVIQ Label



BELVIQ (Lorcaserin): Clinical Data Summary

BELVIQ Successfully Completed a Three-Trial Phase III Program

BELVIQ’s Phase III pivotal program consisted of two randomized, placebo-controlled trials,

BLOOM and BLOSSOM, which were required for NDA submission. Positive results from

BLOOM and BLOSSOM were reported in March 2009 and September 2009, respectively. A

third, non-pivotal, Phase III trial (BLOOM-DM) in type 2 diabetics had positive results reported

in November 2010. All three trials were conducted in the U.S. BELVIQ has demonstrated

modest weight loss with a benign safety profile in these three Phase III trials.

The co-primary endpoint for all the studies were: the proportion of patients achieving ≥ 5%

weight loss from baseline at one year, mean change in body weight from baseline, and the

proportion of patients achieving ≥ 10% weight loss from baseline at one year. Per FDA

guidelines, subjects enrolled in all three trials (BLOOM, BLOSSOM and BLOOM-DM) received

diet and exercise counseling, in addition to drug or placebo. FDA guidance has delineated the

primary efficacy benchmark for weight management drugs as achievement of either a

statistically significant difference in mean weight loss of at least 5% between therapy and

placebo groups, or a categorical loss > 5% of baseline body weight in at least 35% of patients

on therapy, which proportion should be approximately double that for placebo.

The following tables provide an overview of the BELVIQ Phase III program:



BELVIQ Phase III Program Summary

BLOOM BLOSSOM BLOOM-DM*

Number of patients 3,182 4,008 604

Duration 2 years 1 year 1 year

Treatment groups BELVIQ 10 mg BID, PlaceboBELVIQ 10 mg QD, BELVIQ 10 mg BID,

Placebo

BELVIQ 10 mg QD, BELVIQ 10 mg

BID, Placebo

Patient demographics BMI 30-45 kg/m

2, or 27-45 kg/m

2 with ≥ 1

co-morbid condition

BMI 30-45 kg/m2, or 27-29.9 kg/m

2 with ≥

1 co-morbid conditionBMI 27-45 kg/m

2

Comorbidities for inclusion Type 2 diabetes

Mean baseline weight, lbs 220 220 228

Mean BMI, kg/m2 36 36 36

Average age (years) 44 44 53

Female Proportion 84% 80% 54%

Ethnicity

Caucasian (67%)

African-American (19%)

Hispanic (12%)

Caucasian (67%)


Hispanic (11%)

Caucasian (61%)


Hispanic (14%)

Adjunct lifestyle/behavior modification

program

Individual 15-60 min counseling on nutrition

and exercise at weeks 2/4 and then

monthly

Individual counseling on nutrition and

exercise at baseline, weeks 1/2/4 and

then monthly

Individual 15-60 min counseling on

nutrition and exercise at weeks 2/4 and

then monthly

Co-primary endpoints

Data Announced March 2009 September 2009 November 2010

1) proportion of patients ≥ 5% weight loss

2) mean change in body weight from baseline


Required one or more of the following: hypertension, dyslipidemia, cardiovascular

disease, impaired glucose tolerance, or sleep apnea

Source: Cowen and Company, Arena Pharmaceuticals, *BLOOM-DM was not a pivotal trial

BELVIQ Phase III Efficacy Data

Mean Weight Loss

(%)

Treatment Group

Mean Weight Loss

(%)

Placebo Group

Mean Weight Loss (%)

Placebo- adjusted

>5% Weight Loss

Treatment Group

>5% Weight Loss

Placebo Group

>5% Weight

Loss

Placebo-

Adjusted

>10% Weight

Loss

Treatment Group

>10% Weight

Loss

Placebo Group

>10% Weight

Loss

Placebo-

Adjusted

BLOOM (009);

BELVIQ 10mg BID (n=3,182)5.8% 2.2% 3.6% 47.5% 20.3% 27.2% 22.6% 7.7% 14.9%

BLOOM-DM (010);

BELVIQ 10mg BID; (n=604)4.5% 1.5% 3.0% 37.5% 16.1% 21.4% 16.3% 4.4% 11.9%

BLOSSOM (011);

BELVIQ 10mg BID; (n=4,008)5.8% 2.8% 3.0% 47.2% 25.0% 22.2% 22.6% 9.7% 12.9%

BLOOM (009);

BELVIQ 10mg BID (n=3,182)8.1% 3.3% 4.8% 66.4% 32.1% 34.3% 36.2% 13.6% 22.6%

BLOOM-DM (010);

BELVIQ 10mg BID; (n=604)5.5% 1.7% 3.8% 44.6% 17.9% 26.7% 20.8% 5.8% 15.0%

BLOSSOM (011);

BELVIQ 10mg BID; (n=4,008)7.9% 4.0% 3.9% 63.2% 34.9% 28.3% 35.1% 16.1% 19.0%

BELVIQ 10mg BID (completers)

BELVIQ 10mg BID (ITT)




The BLOOM trial included serial 2D echocardiogram monitoring for all subjects, to evaluate for

changes consistent with FDA-defined valvulopathy. ECHOs were performed at baseline, 6, 12,

18, and 24 months, and 6- and 12-month results were reviewed by a DSMB. Although the

primary efficacy analysis in BLOOM was based on one-year results, the safety evaluation

spanned two years. BLOSSOM and BLOOM-DM were one-year trials, which began in

December 2007, and the FDA allowed Arena to enroll patients with pre-existing valvulopathy

into both trials. ECHOs were collected at baseline, 6, and 12 months for database purposes.

Enrollment in the BLOOM-DM trial was initially slow, in part due to a fairly high level of

competition for patients among numerous U.S. diabetes studies, but was completed in August

2009, totaling 604 subjects with type 2 diabetes managed on oral medications.

Trial #1: BLOOM meets FDA’s efficacy requirements

BLOOM was a 2-year, randomized, placebo-controlled, double-blind, Phase III study which

evaluated the efficacy and safety of BELVIQ, administered with a lifestyle modification

program. For the first year, 3,182 patients were randomized 1:1 to receive BELVIQ 10 mg BID

or placebo. Patients remaining in the trial at the end of year 1 could continue in the study for

another year. For year 2, patients in the placebo group continued on placebo, but patients who

had received BELVIQ were again randomized 2:1 to continue on BELVIQ or to begin on

placebo. Eligibility criteria for the trial included age 18-65 years and BMI 30-45 kg/m2 or 27-45

kg/m2 having at least one of the following co-morbid conditions: hypertension, dyslipidemia,

cardiovascular disease, impaired glucose tolerance, or sleep apnea. At each patient visit

(weeks 2 and 4 after randomization and then monthly), a trained counselor provided individual

standardized nutritional and exercise counseling lasting 15-60 minutes, depending on the

study week. Patients were instructed to participate in moderate exercise for 30 minutes per day

and to reduce daily caloric intake by 600 kcal.

In March 2009, Arena announced that the BLOOM trial achieved all three of its co-primary

efficacy endpoints (% of patients losing ≥ 5% body weight, average weight loss, and % of

patients losing ≥ 10% of their weight) with p<0.001.

BLOOM Trial: Baseline Patient Characteristics

Number of Patients 3,182

Average BMI, kg/m2 36.2

Average Weight 220 lbs

Average Age, years 44.1

Female Proportion 84%


1) % average weight loss: BELVIQ patients had an average weight loss of 5.8% (12.7 lbs) vs.

2.2% (4.7 lbs) for placebo, for a placebo-adjusted average weight loss of 3.6%, or 8 lbs. This



result was statistically significant; it did not, however, meet FDA’s efficacy benchmark of a 5%

difference in average weight loss between therapy and placebo.

2) % of patients losing at least 5% of their weight: 47.5% of BELVIQ patients lost at least

5% of baseline body weight, compared to 20.3% of placebo patients. With these data, BELVIQ

met the threshold specified in FDA's draft guidance for efficacy of obesity drugs.

3) % of patients losing at least 10% of their weight: 22.6% of BELVIQ patients in the trial

lost at least 10% of body weight, compared to 7.7% of placebo patients.

Arena presented updated data at ADA 2009 from an analysis of those patients who completed

one year of treatment per protocol. In this population, the average weight loss was 18 lbs (8%)

in the drug arm, compared to 7.3 lbs (3.2%) in the placebo group. 66.4% of BELVIQ

completers lost at least 5% of baseline body weight, compared to 32.1% of placebo patients

(p<0.0001), while 36.2% of BELVIQ completers lost at least 10% of body weight, compared to

13.6% for placebo (p<0.0001).

BLOOM Trial: Efficacy Data

Key Endpoints BELVIQ 10mg BID Placebo Difference p-value

n (ITT-LOCF) n=1,538 n=1,499

Mean Weight Loss (%) (ITT-LOCF) 5.8% 2.2% 3.6% <0.001

≥5% weight loss (ITT-LOCF) 47.5% 20.3% 27.2% <0.001


n (Completers) n=583 n=737

Mean Weight Loss (%) (Completers) 8.1% 3.3% 4.8% <0.001

≥5% weight loss (Completers) 66.4% 32.1% 34.3% <0.001


Completion rate 38% 49% -

BLOOM (n=3,182)


BELVIQ also improved a number of secondary parameters to a greater extent than placebo

(p<0.001), including waist circumference (-6.8cm vs. -3.9cm), triglycerides (-6.15% vs. -

0.14%), hs-CRP (-1.19mg/L vs. -0.17mg/L), hemoglobin A1C (-0.04% vs. 0.03%) and quality of

life (as measured by the IWQOL-LITE scale, 12.4 for BELVIQ vs. 10.7 for placebo, p<0.001).

With BELVIQ treatment, at 52 weeks, there were also significant reductions from baseline in

systolic and diastolic blood pressures, as well as heart rate, compared with placebo.



BLOOM Trial: Secondary Endpoints

BELVIQ (n = 1,538) Placebo (n = 1,499) p-value

Change in waist circumference -6.8cm -3.9cm <0.001

Change in triglycerides -6.15% -0.14% <0.001

Change in hs-CRP -1.19mg/L -0.17mg/L <0.001

Change in IWQOL-LITE 12.4 10.7 <0.001

Change in heart rate -2.0 bpm -1.6 bpm 0.0499

Change Systolic BP (mm Hg) -1.4 mm Hg -0.8 mm Hg 0.04

Change Diastolic BP (mm Hg) -1.1 mm Hg) -0.6 mm Hg 0.01 Source: Cowen and Company, Arena Pharmaceuticals

In BLOOM, the primary endpoint at year 2 was the proportion of patients losing ≥ 5% of

baseline body weight at the end of year 1 who maintained this weight reduction. In BELVIQ

patients who had ≥ 5% weight loss at 52 weeks, more patients who continued to receive

BELVIQ in year 2 maintained this loss, compared to those on placebo (67.9% vs. 50.3%,

p<0.001). The mean body weight was lower in patients treated with BELVIQ for two years

compared with mean body weight in patients on placebo for both years.

Could Safety be BELVIQ’s distinguishing feature?

While generally considering BELVIQ’s efficacy to be “modest,” our consultants were more

positive about its side effect profile. BLOOM produced no serious safety signals. There were

no seizures, and CNS adverse events (depression, anxiety, and suicidal ideation) occurred at

similar rates in both groups. The incidence of depression, depressive symptoms, or depressed

mood was 2.5% in the BELVIQ group and 2.2% in the placebo group at 52 weeks, while the

incidence of suicidal thoughts was 1.3% in each group. The rates of serious adverse events

were similar for placebo and BELVIQ.

In BLOOM, the echocardiographic safety endpoint was the proportion of patients developing

FDA-defined valvulopathy (mild or greater aortic regurgitation and/or moderate or greater mitral

regurgitation) at week 52, and this primarily determined the sample size. A non-inferiority

analysis was used to compare the rates of valvulopathy in BELVIQ patients and in placebo

patients. Based on a non-inferiority margin equating to a relative risk of valvulopathy with

BELVIQ of 1.5, the study was sized to rule out a >50% increase in the incidence of

valvulopathy between the groups at 52 weeks, with statistical power of 80% at the 5%

significance level. At 52 weeks, FDA-defined valvulopathy had occurred in 2.7% of BELVIQ

patients compared with 2.3% of placebo patients (p=0.70, relative risk with BELVIQ: 1.1). At 2

years, the rates for the BELVIQ and placebo groups were 2.6% and 2.7%, respectively.

Our consultants believe that BELVIQ’s clean adverse event profile could be the key driver of its

use. For example, other drugs that produce a similar degree of weight loss are sibutramine and

orlistat. However, BELVIQ appears to be safer than sibutramine (which was removed from the

market for its cardiovascular effects) and better tolerated than orlistat (which can produce

urgent bowel movements, oily spotting, and flatulence).



BLOOM Trial: Safety Data

BELVIQ 10 mg BID

(n=1,593)

n(%)

Placebo

(n=1,584)

n(%)

Headache 287 (18.0) 175 (11.0)

Upper respiratory infection 235 (14.8) 189 (11.9)

Nasopharyngitis 213 (13.4) 190 (12.0)

Dizziness 130 (8.2) 60 (3.8)

Nausea 119 (7.5) 85 (5.4)

Sinusitis 114 (7.2) 130 (8.2)

Diarrhea 109 (6.8) 85 (5.4)

Urinary tract infection 106 (6.7) 96 (6.1)

Constipation 106 (6.7) 64 (4.0)

Back pain 99 (6.2) 89 (5.6)

Fatigue 95 (6.0) 48 (3.0)

Dry mouth 83 (5.2) 37 (2.3)

Gastroenteritis (viral cause) 79 (5.0) 64 (4.0)

Influenza 73 (4.6) 69 (4.4)

Arthralgia 70 (4.4) 75 (4.7)

Cough 65 (4.1) 56 (3.5)

Vomiting 59 (3.7) 42 (2.7)

Pharyngolaryngeal pain 57 (3.6) 43 (2.7)

Bronchitis 56 (3.5) 62 (3.9)

Sinus congestion 53 (3.3) 37 (2.3)

Pain in extremity 52 (3.3) 49 (3.1)

Procedural pain 47 (3.0) 41 (2.6)

Insomnia 41 (2.6) 58 (3.7)


Trial #2: BLOSSOM

BLOSSOM was a 1-year, randomized, placebo-controlled, double-blind, Phase III study which


program. 4,008 patients were randomized 2:1:2 to receive BELVIQ 10 mg BID, BELVIQ 10 mg

daily, or placebo. Eligibility criteria for the trial included age 18-65 years and BMI 30-45 kg/m2

or 27-29.9 kg/m2 having at least one of the following co-morbid conditions: hypertension,

dyslipidemia, cardiovascular disease, impaired glucose tolerance, or sleep apnea, as well as

ability to participate in a moderate-intensity exercise program. Patients were provided

nutritional and physical exercise counseling at baseline, weeks 1/2/4, and subsequently on a

monthly basis. Patients were encouraged to moderately exercise for 30 minutes per day and

instructed to reduce daily caloric intake by 600 kcal.

In September 2009, Arena released top-line results from BELVIQ's BLOSSOM trial. Full data

were presented in October 2009 at the Obesity Society Meeting.



The trial achieved all three of its co-primary efficacy endpoints (% of patients losing ≥ 5% body

weight, average weight loss, and % of patients losing ≥ 10% of their weight) with p<0.0001.

BLOSSOM Trial: Baseline Patient Characteristics

Number Of Patients 4,008

Average BMI, kg/m2 35.9


Average Age, years 44


Baseline Valvulopathy 4-5% Source: Cowen and Company, Arena Pharmaceuticals

1) % average weight loss: BELVIQ patients (10 mg BID group) had an average weight loss of

5.8% (12.8 lbs) vs. 2.8% (6.4 lbs) for placebo, resulting in a placebo-adjusted average weight

loss of 3.0%, or 6.4 lbs. This result was statistically significant; just as in the BLOOM trial

though, it did not meet FDA’s efficacy benchmark of a 5% difference in average weight loss

between therapy and placebo. The 10mg QD group had weaker efficacy, with just a 1.9%

difference in placebo-adjusted weight loss.

2) % of patients losing at least 5% of their weight: 47.2% of BELVIQ patients (10 mg BID

group) lost at least 5% of baseline body weight, compared to 25% of placebo patients. With

these data, BELVIQ met the threshold specified in FDA's draft guidance for efficacy of obesity

drugs. The 10mg QD group had weaker efficacy here, too, and the difference between it and

placebo was less than the FDA guidance of the active arm being approximately double that of

placebo.

3) % of patients losing at least 10% of their weight: 22.6% of BELVIQ patients (10 mg BID

group) in the trial lost at least 10% of body weight, compared to 9.7% of placebo patients. Not

surprisingly, the 10mg QD group had weaker efficacy here, too.

BLOSSOM Trial: Efficacy Data

Key Endpoints BELVIQ 10mg BID BELVIQ 10mg QD PlaceboDifference from

10mg BIDp-value

Difference from

10mg QDp-value

n (ITT-LOCF) n=1,602 n=801 n=1,601

Mean Weight Loss (%) (ITT-LOCF) 5.8% 4.7% 2.8% 3.0% <0.001 1.9% <0.001

≥5% weight loss (ITT-LOCF) 47.2% 40.2% 25.0% 22.2% <0.001 15.2% <0.001

≥10% weight loss (ITT-LOCF) 22.6% 17.4% 9.7% 12.9% <0.001 7.7% <0.001

n (Completers) n=846 n=418 n=764

Mean Weight Loss (%) (Completers) 7.9% 6.5% 4.0% 3.9% <0.001 2.5% <0.001

≥5% weight loss (Completers) 63.2% 53.1% 34.9% 28.3% <0.001 18.2% <0.001

≥10% weight loss (Completers) 35.1% 26.3% 16.1% 19.0% <0.001 10.2% <0.001

Completion rate 53% 52% 48% - -

BLOSSOM (n=4,008)




In addition to the weight loss efficacy, BELVIQ also improved a number of secondary

parameters to a greater extent than placebo, including waist circumference (-6.3cm vs. -4.1cm,

p<0.001), triglycerides (-4.3% vs. -0.9%, p=0.02), and quality of life (as measured by the

IWQOL-LITE scale, 11.8 for BELVIQ vs. 10.0 for placebo, p<0.001). Systolic and diastolic

blood pressures, as well as heart rate, decreased from baseline to week 52 in both the

BELVIQ and placebo groups, but these differences were not statistically significant.

BLOSSOM Trial: Secondary Endpoints

BELVIQ

(n = 1,561)

Placebo

(n = 1,541)p-value

Change in waist circumference -6.3cm -4.1cm <0.001

Change in triglycerides -4.3% -0.9% 0.02


Change in heart rate -2.3 bpm -1.6 bpm ND

Change Systolic BP (mm Hg) -1.9 mm Hg -1.2 mm Hg NS

Change Diastolic BP (mm Hg) -1.9 mm Hg) -1.4 mm Hg NS

ND: not determined; NS: not significant Source: Cowen and Company, Arena Pharmaceuticals

BELVIQ continues to show clean safety profile in BLOSSOM

Similar to BLOOM, BELVIQ was associated with a favorable safety and tolerability profile in

BLOSSOM, with few meaningful imbalances between the arms. Importantly, there was no

difference between drug and placebo in rates of depression, suicidal ideation, or FDA-defined

valvulopathy. New echocardiographic findings consistent with FDA-defined valvulopathy

developed at 52 weeks in 2.0% of BELVIQ BID patients, 1.4% of BELVIQ QD patients, and

2.0% of placebo patients. Among patients who had pre-existing valvulopathy at baseline, the

proportion of patients experiencing any increase in mitral or aortic regurgitation was 12.1% in

the BELVIQ BID group, 11.1% in the BELVIQ QD group, and 30.6% in the placebo group.



BLOSSOM Trial: Safety Data

Adverse EventsBELVIQ 10 mg BID

n(%)

BELVIQ 10 mg QD

n(%)

Placebo

n(%)

Patients with any AE 1,323 (82.6) 653 (81.5) 1,205 (75.3)

Patients with any serious AE 49 (3.1) 27 (3.4) 36 (2.2)

Discontinuation due to AE 115 (7.2) 50 (6.2) 73 (4.6)

FDA-defined valvulopathy 24(2.0) 9 (1.4) 23 (2.0)

AE with incidence >5% in any group

Headache 250 (15.6) 125 (15.6) 147 (9.2)

Upper respiratory tract infection 204 (12.7) 117 (14.6) 202 (12.6)

Nasopharyngitis 201 (12.5) 95 (11.9) 192 (12.0)

Nausea 145 (9.1) 61 (7.6) 85 (5.3)

Dizziness 140 (8.7) 50 (6.2) 62 (3.9)

Fatigue 134 (8.4) 53 (6.6) 66 (4.1)

Sinusitis 122 (7.6) 67 (8.4) 117 (7.3)

Urinary tract infection 107 (6.7) 61 (7.6) 77 (4.8)

Back pain 101 (6.3) 55 (6.9) 91 (5.7)

Diarrhea 98 (6.1) 53 (6.6) 94 (5.9)

Dry mouth 87 (5.4) 27 (3.4) 37 (2.3)

Constipation 80 (5.0) 41 (5.1) 61 (3.8)

Psychiatric AE of interest

Depression 31 (1.9) 9 (1.1) 29 (1.8)

Depressed mood 10 (0.6) 7 (0.9) 14 (0.9)

Suicidal ideation 15 (0.9) 5 (0.6) 11 (0.7)


Trial #3: BLOOM-DM

BLOOM-DM was a 1-year, randomized, placebo-controlled, double-blind, Phase III study which


program, in patients with type 2 diabetes treated with metformin and/or a sulfonylurea (SFU).

In the trial, 604 patients were randomized 1:1:1 to receive BELVIQ 10 mg BID, BELVIQ 10 mg

daily (QD), or placebo. After approximately 8 months, the protocol was amended, and

enrollment was discontinued in the BELVIQ 10 mg QD arm because of slow trial recruitment.

Already enrolled patients remained in the study. Eligibility criteria for the trial included age 18-

65 years and BMI 27-45 kg/m2 with type 2 diabetes treated with metformin ± a SFU and HbA1c

level 7-10% at screening, as well as the ability to participate in a moderate-intensity exercise

program. Use of insulin in any form was an exclusion criterion. At each patient visit (weeks 2

and 4 after randomization and then monthly), patients had individual counseling sessions of

15-60 minutes, including advice about exercise, behavior modification, calorie restriction, and

food choices. Patients were instructed to moderately exercise for 30 minutes per day and to

reduce daily caloric intake by 600 kcal.

Arena announced topline results from BLOOM-DM in November 2010. BLOOM-DM met its

three co-primary endpoints (% of patients losing ≥ 5% body weight, average weight loss, and

% of patients losing ≥ 10% of their weight) with p < 0.0001. Efficacy was comparable to that in

the previous two BELVIQ trials.



BLOOM-DM Trial: Baseline Patient Characteristics

Number Of Patients 604

Average BMI, kg/m2 36



Average HbA1c Level 8%

Female Proportion 54% Source: Cowen and Company, Arena Pharmaceuticals

1) % average weight loss: BELVIQ patients had an average weight loss of 4.5% vs. 1.5% for

placebo, resulting in a placebo-adjusted average weight loss of 3.0%. This result was

statistically significant; once again, as in BELVIQ’s previous two other Phase III trials, this

result did not meet FDA’s efficacy benchmark of a 5% difference in average weight loss

between therapy and placebo.

2) % of patients losing at least 5% of their weight: 37.5% of BELVIQ patients lost at least

5% of baseline body weight, compared to 16.1% of placebo patients. With these data, BELVIQ

met the threshold specified in FDA's draft guidance for efficacy of obesity drugs.

3) % of patients losing at least 10% of their weight: 16.3% of BELVIQ patients in the trial

lost at least 10% of body weight, compared to 4.4% of placebo patients.

BLOOM-DM Trial: Efficacy Data

Key Endpoints BELVIQ 10mg BID Placebo Difference p-value

n (ITT-LOCF) n=251 n=248

Mean Weight Loss (%) (ITT-LOCF) 4.5% 1.5% 3.0% <0.001



n (Completers) n=169 n=157

Mean Weight Loss (%) (Completers) 5.5% 1.7% 3.8% <0.001



Completion rate 67% 63% - -

BLOOM-DM (n=604)


Additionally, there were improvements noted in secondary endpoints pertaining to glycemic

control, anthropometric measures, and cardiometabolic parameters. Glycemic control was

evaluated by HbA1c, fasting glucose, fasting insulin, and calculated insulin resistance using



homeostatic model assessment-insulin resistance (HOMA-IR). Mean HbA1c, fasting plasma

glucose, and insulin resistance were significantly more decreased in the BELVIQ group

compared with placebo. At 52 weeks, 50.4% of BELVIQ patients had HbA1c level ≤ 7%,

compared with 26.3% of placebo patients. Waist circumference was also reduced significantly

with BELVIQ treatment compared to placebo (-5.5 cm vs. -3.3 cm). Systolic and diastolic blood

pressures decreased from baseline to week 52 in both the BELVIQ and placebo groups, with

no significant differences noted, as was the case with triglyceride levels. Heart rate, however,

did decrease significantly with BELVIQ vs. placebo (-2 bpm vs. -0.4 bpm).

BLOOM-DM Trial: Secondary Endpoints

BELVIQ 10 mg BID

(n = 251)

Placebo

(n = 248)p-value

Change in HbA1C -0.9% -0.4% <0.001

% with HbA1C < 7% 50.4% 26.3% <0.001

Change in fasting glucose -27.4 mg/dL -11.9 mg/dL <0.001

Change in fasting insulin -3 μIU/ml -1.6 μIU/ml 0.12

Change in HOMA-IR -0.5 -0.2 0.022


Change in hs-CRP -1.3 g/L -0.6 g/L 0.15

Change in IWQOL-LITE 11.3 10.2 0.221

Change in waist circumference -5.5cm -3.3cm 0.001 Source: Cowen and Company, Arena Pharmaceuticals

Safety OK overall…but valvulopathy signal resurfaces

Safety was similar to that observed in the BLOOM and BLOSSOM trials, with headache being

the most common unbalanced AE. Hypoglycemia was more frequent with BELVIQ treatment

compared with placebo, with 7.4% and 6.3% of patients in each group, respectively, reporting

at least one episode of symptomatic hypoglycemia. There were no reports of severe

hypoglycemia, which was defined as an episode causing confusion, loss of consciousness, or

treatment with intravenous agents, in either group. Also, no patients in either group

discontinued because of hypoglycemia.



BLOOM-DM Trial: Safety Data

BELVIQ 10 mg BID

(n=256) n(%)

Placebo

(n=252) n(%)

Headache 37 (14.5) 18 (7.1)

Back pain 30 (11.7) 20 (7.9)

Nasopharyngitis 29 (11.3) 25 (9.9)

Nausea 24 (9.4) 20 (7.9)

Urinary tract infection 23 (9.0) 15 (6.0)

Cough 21 (8.2) 11 (4.4)

Symptomatic hypoglycemia 19 (7.4) 16 (6.3)

Fatigue 19 (7.4) 10 (4.0)

Gastroenteritis, viral 18 (7.0) 11 (4.4)

Dizziness 18 (7.0) 16 (6.3)

Influenza 15 (5.9) 13 (5.2)

Procedural pain 13 (5.1) 5 (2.0)

Hypertension 13 (5.1) 8 (3.2)

Gastroenteritis 8 (3.1) 5 (2.0)

Depression 6 (2.3) 5 (2.0)

FDA-defined valvulopathy 6(2.9) 1 (0.5) Source: Cowen and Company, Arena Pharmaceuticals

With regard to cardiac valvulopathy, there was a trend toward increased new-onset

valvulopathy at 52 weeks in the BELVIQ arm, although the trial was not powered to detect a

statistically significant difference. At 52 weeks, one patient (0.5%) in the placebo group and 6

patients (2.9%) in the BELVIQ BID group had echocardiographic FDA-defined valvulopathy

which was not present at baseline. The difference in incidence rates between the BELVIQ and

placebo groups is higher than differences between the groups in the BLOOM and BLOSSOM

studies, but given the small size of the trial, the differences in this trial did not reach statistical

significance.

Among those with pre-existing FDA-defined valvulopathy at baseline, 11.1% of BELVIQ

patients and 12.5% of placebo patients experienced any increase in mitral regurgitation or

aortic regurgitation score at week 52. This difference was not statistically significant.

Responder Analysis in BLOOM and BLOSSOM Studies

Updated responder data from a pooled, post hoc analysis of the BLOOM and BLOSSOM

studies were presented in June 2013 at the American Diabetes Association meeting. The

BLOOM and BLOSSOM study results were combined, representing patients without type 2

diabetes.

In the combined analysis, 49% (1,251 of 2,537) of patients treated with BELVIQ were

categorized as responders, defined by total body weight loss of at least 5% by week 12.

These patients achieved mean weight loss of 10.6 kg (10.7%) in 52 weeks. This amount of



weight loss was similar to the weight loss achieved by responders on placebo of 9.5 kg (9.5%).

The difference was that only 22.6% of placebo patients (541 of 2,393) met the ―at least 5%

weight loss by week 12‖ threshold and were categorized as responders, versus the 49.3% of

BELVIQ patients meeting that definition.

Responder Analysis From the BLOOM and BLOSSOM Studies

RespondersBELVIQ 10mg

BID (n=1,251)

Placebo

(n=541)

Mean baseline weight, kg 99.0 100.3

Mean weight loss, kg 10.6 9.5

Mean weight loss % 10.7% 9.5%

% responders 49.3% 22.6%

Source: Cowen and Company, Arena 2013 ADA Poster

Responder Analysis in BLOOM-DM Study

The June 2013 ADA presentation also had responder analysis from BLOOM-DM, in which

patients had type 2 diabetes. In BLOOM-DM, 35.9% (78/217) of patients treated with BELVIQ

were categorized as responders, defined by total body weight loss of 5% by week 12. These

patients achieved mean weight loss of 9.3 kg (9%) vs. 7.5 kg (7%) for placebo responders.

However, only 11.5% of placebo patients met the 5% weight loss by week 12 threshold and

were categorized as responders, vs. 35.9% for the patients treated with BELVIQ.

Responder Analysis From the BLOOM-DM Study

RespondersBELVIQ 10mg

BID (n=78)

Placebo

(n=25)

Mean baseline weight, kg 102 103

Mean weight loss, kg 9.3 7.5

Mean weight loss % 9.1% 7.3%

% responders 35.9% 11.5%

Source: Cowen and Company, Arena 2013 ADA Poster

Side-Effect Profile Will Carve Out a Niche, But Broader Use Is Likely Only In Combination With Phentermine

Assuming tumorigenesis concerns resulting from preclinical models are viewed by physicians

to have no clinical relevance in humans, and that the same goes for the potential valvulopathy

signal seen in BLOOM-DM, our consultants believe that BELVIQ’s otherwise clean side effect

profile could carve out a niche in mildly obese people who seek medical treatment. They also

suggest that BELVIQ’s ultimate potential will depend on combinability with phentermine.



Consultants are unsure about how quickly a BELVIQ/phentermine combination therapy would

be adopted by physicians. Some think that BELVIQ may be combined with phentermine off-

label immediately upon FDA approval. Many others note, however, that most physicians would

be hesitant to combine the two because of their experience with Fen-Phen, and that material

combination therapy will occur only after a large safety and efficacy trial has been conducted.

Future Studies with BELVIQ

Arena has indicated that, in conjunction with partner Eisai, plans and strategy for further

studies of BELVIQ to support additional potential indications are being considered. Discussions

with Eisai will be finalized before proceeding to communication with FDA regarding any new

potential indication. Management has indicated that potential areas of further investigation

include: 1) BELVIQ in combination with phentermine, 2) BELVIQ in combination with

olanzapine to address weight gain associated with antipsychotic use, 3) BELVIQ in

combination with metformin for diabetic patients, and 4) BELVIQ as a single agent for smoking

cessation.

BELVIQ-Phentermine Combination: In May 2013, Arena reported that a development plan

had been finalized with Eisai for the study of BELVIQ in combination with phentermine. A

meeting with the FDA was undertaken in 2Q13 to discuss investigation of this combination.

Management commented that the FDA appeared “to be amenable” to the BELVIQ-

phentermine combination (2Q13 earnings call, 8/1/13).

BELVIQ-Phentermine Combination Studies: In August 2013, Arena reported that a PK study

evaluating the BELVIQ-phentermine combination was completed, with data being analyzed.

This study evaluated BELVIQ 10 mg, phentermine 15 mg, and the BELVIQ-phentermine

combination (10 mg/15 mg). Additionally, Arena announced that Eisai will be initiating a 12-

week pilot study of BELVIQ-phentermine by YE13 or the beginning of 2014. Eisai has not

disclosed the study design. Management indicated that the results of both studies will inform

the future development plan for the combination. Arena is covering costs of the PK study, and

Eisai will cover costs related to the pilot study. The further co-development agreement for the

combination is “under discussion” with Eisai, according to Arena management



Summary of BELVIQ’s Regulatory History

NDA Submitted in December 2009; FDA AdCom in September 2010

In December 2009, Arena submitted BELVIQ’s NDA to the FDA. In September 2010, the FDA

AdCom voted 9-5 against recommending approval. The panel concluded that there was too

much uncertainty about BELVIQ's risks, in light of its relatively modest effects on weight loss,

to support approval at that time.

Committee members were generally comfortable that BELVIQ's efficacy, though modest, met

the FDA bar and might be clinically significant. However, the limited efficacy made the panel

more critical of risks. Panelists had two primary concerns: 1) an unexplained preclinical

carcinogenicity signal, and 2) the patient population used in the pivotal trials was not seen as

representative of the presumed real-world patient group. Although they believed Arena made

all reasonable efforts to rule out drug-induced valvulopathy, they suggested that programs to

monitor this issue should be a condition of any approval.

Rat Carcinogenicity Data a Surprise in Briefing Documents, Made Risk/Benefit Unacceptable To AdCom

In FDA briefing documents prepared for the September 2010 BELVIQ AdCom review, it was

revealed that a number of malignant tumors had developed in BELVIQ’s rat carcinogenicity

studies, including tumors of breast, brain, peripheral nerve, skin and subcutis. However, only

mammary tumors were increased to a statistically significant degree in both male and female

rats, and therefore these were the most concerning to committee members. Moreover, the

mammary tumors developed in female rats treated with BELVIQ at doses within sevenfold of

the proposed clinical dose of 10mg BID, which was low enough that the FDA was concerned

about the margin for safety. The FDA’s concerns were further supported by the fact that

preclinical studies had not produced similar tumors in mice. The agency suggested that this

was likely due to lower levels of drug exposure achieved in mice. Moreover, the FDA did not

accept Arena’s studies linking increased tumorigenesis to elevated serum prolactin levels,

which would suggest little clinical significance in humans. The FDA concluded that “given the

lack of a safety margin, an unresolved tumorigenic mechanism of action, and a patient

population already at increased risk of breast cancer, the relevance of these findings in rats to

human risk cannot be dismissed.”



Incidence of BELVIQ-Induced Tumors In Two-Year Rat Carcinogenicity Study

Control 10 30 100

Brain astrocytoma 1 0 4 NS 8 SS

adenocarcinoma 0 0 2 2 NS

fibroadenoma 0 1 4 NS 6 NS

combined 0 1 6 SS 8 SS

Skin, subcutis benign fibroma 3 7 NS 11 SS 17 SS

Skin squamous carcinoma 0 0 4 NS 5 SS

Nerve Sheath Schwannoma, all sites 0 0 2 NS 9 SS

hepatocellular carcinoma 1 3 2 4

hepatocellular adenoma 1 1 2 6 SS

combined 2 4 4 NS 10 SS

Thyroid follicular cell adenoma 0 5 4 NS 8 SS

Control 10 30 100

Brain astrocytoma 0 2 0 1

adenocarcinoma 28 34 NS 35 NS 60 SS

fibroadenoma 20 47 SS 53 SS 45 SS

combined 40 56 SS 61 SS 70 SS

SS: Statistically significant, NS: Not statistically significant

Incidence of tumors

Mammary

Male rats BELVIQ dose, mg/kg/day

Incidence of tumors

Mammary

Liver

Female rats BELVIQ dose, mg/kg/day

Source: Cowen and Company, FDA’s BELVIQ briefing documents

CRL Received In October 2010

In October 2010, Arena received a CRL for BELVIQ. The letter requested that Arena complete

and submit BELVIQ's BLOOM-DM trial in obese patients with diabetes, as well as additional

preclinical rat toxicology studies to better understand BELVIQ's association with mammary and

central nervous system (CNS) tumors. Specifically, regarding the rat tumor findings, the FDA

requested additional preclinical data and analyses, including a detailed accounting of the

female rat slides that contributed to the rat mammary tumor incidence data, a re-adjudication of

all mammary and lung tissues from all female rats, a demonstration that the adenocarcinoma

findings have no relevance to humans, and additional data on the distribution of BELVIQ to the

CNS to better estimate the astrocytoma exposure margins.

Report Shows a Shift in Incidence Numbers of BELVIQ-Induced Tumors

To address the rat tumor findings the company convened a Pathology Working Group (PWG)

consisting of 5 pathologists to re-adjudicate the mammary tumors. In August 2011, Arena

announced the results from the PWG re-adjudication. The data showed a shift in the numbers

of both tumor types, benign and malignant, relative to the initial results included in the NDA.

The new analysis showed that the incidences of adenocarcinomas in the BELVIQ low- and

mid-dose groups were no longer numerically higher than those in the control group. However,

the incidence was statistically higher in the BELVIQ high (100mg/kg/day) dose group.

Incidence of fibroadenomas was statistically higher than the control group for all three BELVIQ

dose groups.



PWG Reported Incidence of BELVIQ-Induced Tumors

Dose Control 10 mg/kg/day 30 mg/kg/day 100 mg/kg/day

N 65 65 65 75

Initial Report 43.1% 52.3% 53.9% 80.0%

PWG Report 40.0% 32.3% 36.9% 68.0%

Initial Report 30.8% 72.3% 81.5% 60.0%

PWG Report 36.9% 83.1% 84.6% 68.0%

Percent of Female Rats with Mammary Adenocarcinoma or Fibroadenoma

Mammary Adenocarcinoma (Malignant)

Mammary Fibroadenoma (Benign)


In August 2011, Arena also completed a clinical study designed to measure the concentration

of BELVIQ in human cerebrospinal fluid (CSF) and plasma. The study enrolled nine obese but

otherwise healthy volunteers who were administered BELVIQ 10 mg BID for seven days. On

day seven, lumbar CSF and plasma were serially collected simultaneously over a 12-hour

period. Measured human CSF and plasma exposures (mean AUC (standard deviation)) of 9.3

(+/-3.9) hr-ng/mL and 540 (+/-157) hr-ng/mL, respectively, were observed in the study. Arena

also calculated the estimated ratio of BELVIQ exposure in the brain relative to plasma in

humans using the mean brain: CSF exposure ratio of 101 from preclinical studies, with a range

of 75-117. Based on these results, the company estimated that humans concentrate BELVIQ

in the brain 14 times less compared to rats, and that plasma concentrations of BELVIQ in the

rat carcinogenicity study at a dose with no astrocytoma were five times the anticipated human

clinical exposure, providing a higher safety margin.

Arena Resubmitted the NDA in January 2012

In January 2012, Arena submitted its response to the CRL, including data from the Phase III

BLOOM-DM trial, which had not been included in the original NDA. Arena’s response also

included data and analyses from studies that addressed tumors observed in a two-year

BELVIQ rat carcinogenicity study, cell culture experiments intended to further refine serotonin

subtype 2 receptor activity, and rat studies designed to further assess abuse potential.

Positive FDA AdCom in May 2012 and U.S. Approval in June 2012

In May 2012, the FDA AdCom voted 18-4 in favor of BELVIQ’s approval. In June 2012, the

FDA approved BELVIQ for the treatment of obesity. As per the label, BELVIQ is approved for

the treatment of adults with an initial BMI ≥ 30 kg/m2 (obese) or ≥ 27 kg/m2 (overweight) in the

presence of at least one weight-related comorbid condition.

U.S. Post-marketing requirements, CVOT to be completed by YE 2017

As part of BELVIQ’s approval, the FDA has requested that Arena conduct six post-marketing

studies. The first study is an animal study with juvenile rats, which will be completed prior to

initiation of the other studies. Arena will then be conducting a series of studies to evaluate the



safety and efficacy of BELVIQ in the obese pediatric patient population. In addition, Arena is

also required to conduct a cardiovascular outcomes trial (CVOT) to evaluate the effect of long-

term treatment with BELVIQ on CV safety. Echocardiographic assessments will be included in

this post-marketing CVOT. Arena is currently in discussions with FDA, is finalizing the

protocols for these studies, and expects to initiate these studies sometime in 2013. Arena and

Eisai have agreed on a protocol for the CVOT, and a draft was provided to FDA in February

2013. The company is required to complete the CVOT by December 31, 2017 and to submit

the final report in 2018. As per the agreement with Eisai, Arena will be responsible for 10% of

the CVOT expenses. Furthermore, Arena will be responsible for 50% of certain pediatric

development expenses.

E.U. Regulatory Front: MAA Withdrawn

The BELVIQ MAA was submitted to EMA in March 2012, with the UK as the rapporteur and

Sweden as the co-rapporteur, and in July 2012, Arena also submitted the MAA in Switzerland.

In 4Q12, Arena submitted its response to the CHMP’s 120-day assessment report and list of

questions regarding the MAA. In January 2013, the company received the Day 180 List of

Outstanding Issues from the CHMP. The CHMP requested that the company justify BELVIQ’s

overall benefit-risk profile, taking into account previously raised issues, “including tumors in

rats, valvulopathy, and psychiatric events.” The CHMP requested both oral and written

explanations from the company.

On May 2, 2013, Arena reported that, after the company submitted its written response as well

as oral explanation to the Day 180 List of Outstanding Issues, the CHMP continued to have

―certain major objections‖ which prevented a recommendation to approve the MAA. The

company indicated that the objections were related to results of ―non-clinical studies‖ and that

these could not be resolved before the time of the final CHMP opinion. Therefore, Arena

withdrew the BELVIQ MAA for the E.U. and will ask EMA for scientific advice with regard to

submission at a later time.

Regulatory Update in Other Territories

Mexico: In April 2013, Arena announced that a marketing authorization application had been

submitted in Mexico with the Federal Commission for the Protection Against Sanitary Risk

(COFEPRIS). This submission triggered a $500K milestone from Eisai to Arena.

Canada: In June 2013, Arena announced that a New Drug Submission (NDS) for BELVIQ had

been submitted in Canada, which triggered a $500K milestone from Eisai to Arena.

Brazil: In August 2013, Arena announced that regulatory filings will be submitted for BELVIQ

around YE13.

Switzerland: In August 2013, Arena reported that Swissmedic was “not satisfied” by the

company’s Day 120 response to the agency’s questions and concerns.



BELVIQ Has IP Through mid-2023, Possibly Through mid-2026

As of February 15, 2013, Arena owned issued patents that cover compositions of matter for

BELVIQ and related compounds and methods of treatment utilizing BELVIQ and related

compounds in 69 jurisdictions, including the United States, Japan, Germany, France, China,

Italy, Spain, Canada, the United Kingdom, Russia, Australia, India, and South Korea.

Arena holds U.S. Patent # 6,953,787, entitled ―5HT2C Receptor Modulators.‖ As stated in the

patent abstract, ―The present invention relates to novel compounds of Formula (I): which act as

5HT2C receptor modulators. These compounds are useful in pharmaceutical compositions

whose use includes the treatment of obesity.‖ Arena also holds U.S. Patents # 7,514,422;

7,977,329; 8,207,158; and 8,273,734, which are continuations of U.S. Patent # 6,953,787.

These patents cover the composition of matter of lorcaserin for the treatment of obesity,

providing protection through mid-2023. Arena has filed an application with FDA for a patent

extension under Hatch-Waxman, and believes it should be able to receive an additional 3

years of patent life, resulting in patent protection through mid-2026.

BELVIQ Patent Estate

P a t e n t # T it le F ilin g d a t eE a rlie s t p r io r it y

d a t eE x p ira t io n d a t e

6 ,9 5 3 ,7 8 7 4 /1 0 /2 0 0 3 4 /1 2 /2 0 0 2

7 ,5 1 4 ,4 2 2 8 /1 3 /2 0 0 4 4 /1 2 /2 0 0 2

7 ,9 7 7 ,3 2 9 1 1 /1 4 /2 0 0 6 4 /1 2 /2 0 0 2

8 ,2 0 7 ,1 5 8 5 /2 7 /2 0 1 1 4 /1 2 /2 0 0 2

8 ,2 7 3 ,7 3 4 6 /1 4 /2 0 1 2 4 /1 2 /2 0 0 2

8 ,3 6 7 ,6 5 7

T h e p r e se n t in v e n tio n p r o v id e s p r o ce sse s a n d in te r m e d ia te s fo r th e p r e p a r a tio n o f 3 -

b e n za ze p in e s a n d sa lts th e r e o f w h ich ca n b e u se fu l a s se r o to n in ( 5 - H T ) r e ce p to r

a g o n is ts fo r th e tr e a tm e n t o f, fo r e x a m p le , ce n tr a l n e r v o u s sy s te m d iso r d e r s su ch a s

o b e s ity .

6 /1 4 /2 0 0 4 7 /1 7 /2 0 0 3

8 ,1 6 8 ,6 2 4

T h e p r e se n t in v e n tio n is d ir e c te d to c r y s ta llin e fo r m s o f ( R ) - 8 - ch lo r o - 1 - m e th y l- 2 ,3 ,4 ,5 -

te tr a h y d r o - 1 H - 3 - b e n za ze p in e , co m p o s itio n s co n ta in in g th e sa m e , p r e p a r a tio n s , a n d u se s

th e r e o f.

1 2 /2 0 /2 0 0 5 1 2 /2 1 /2 0 0 4

8 ,1 5 3 ,6 2 1

T h e p r e se n t in v e n tio n r e la te s to a co m p o s itio n co m p r is in g p h e n te r m in e a n d a se le c tiv e

5 H T - 2 C r e ce p to r a g o n is t. In a d d itio n , th e in v e n tio n r e la te s to a co m p o s itio n co m p r is in g

p h e n te r m in e a n d a se le c tiv e 5 H T - 2 C r e ce p to r a g o n is t h a v in g F o r m u la ( I) : o r a

p h a r m a ce u tica lly a cce p ta b le sa lt, so lv a te o r h y d r a te th e r e o f. T h e se co m p o s itio n s a r e

u se fu l in p h a r m a ce u tica l co m p o s itio n s w h o se u se in c lu d e s th e tr e a tm e n t o f o b e s ity .

1 2 /2 1 /2 0 0 5 1 2 /2 3 /2 0 0 4

T h e p r e se n t in v e n tio n r e la te s to n o v e l co m p o u n d s o f F o r m u la ( I) : w h ich a c t a s 5 H T 2 C

r e ce p to r m o d u la to r s . T h e se co m p o u n d s a r e u se fu l in p h a r m a ce u tica l co m p o s itio n s w h o se

u se in c lu d e s th e tr e a tm e n t o f o b e s ity

m id - 2 0 2 3

-

Source: Cowen and Company, USPTO



Obesity: A Brief Overview

Obesity is a chronic condition affecting approximately one-third of the United States population,

and its prevalence has doubled over the past two decades. Obesity is a primary risk factor for

the development of type 2 diabetes, hyperlipidemia, hypertension, and other cardiovascular

disorders, and has been identified as the second most common factor contributing to

preventable death behind tobacco use. Increased body weight also plays a role in the

development of gallbladder disease, degenerative joint disease, respiratory disorders, and

certain types of cancer. As a result, the economic burden of the condition is substantial. Annual

healthcare costs associated with obesity have been estimated to be $190 billion.

According to CDC data from NHANES surveys (―Health, United States 2012,‖ National Center

for Health Statistics 2013), among adults aged 20-74 years, the prevalence of obesity, defined

as a body mass index (BMI) of ≥ 30 kg/m2, has increased from 15% (in the 1976-1980 survey)

to 35.7% (in the 2009-2010 survey), a figure equating to over 71 million people. Even more

troubling is the fact that, in 2007-2008, the prevalence of overweight and obesity, defined as

BMI of ≥ 25 kg/m2, was 68% in the adult population. The annual number of obesity-related

deaths is estimated by the CDC to surpass 360,000. In 2004, the CDC declared obesity to be

the number-one health threat in the U.S. Extrapolating NHANES data, by 2020, 40% of men

and 43% of women are projected to be obese. The recent and rapid rise in obesity rates is

generally attributed to diet and lifestyle shifts that have occurred since the mid-20th century.

Body Mass Index (BMI)

BMI (kg/m2) Obesity Class

Underweight Below 18.5

Healthy weight 18.5 to 24.9

Overweight 25.0 to 29.9

Mild Obesity 30 to 34.9 I

Moderate Obesity 35 to 39.9 II

Severe Obesity 40 or higher III Source: Cowen and Company, Centers for Disease Control



U.S. Prevalence Of Obesity

Source: Centers for Disease Control

Because of the diverse mechanisms believed to underlie weight control, a broad array of

approaches has been attempted to address this large and growing healthcare issue. Diet,

increased physical activity, and behavioral modification are the mainstay strategies for weight

loss and maintenance of healthy body weight. While such lifestyle changes can be effective in

reducing body fat and increasing lean body mass, and are the typical ―prescription‖ for most

overweight patients, compliance with lower-calorie diets and/or exercise regimens is

challenging for most. According to NIH Guidelines on obesity treatment, pharmacotherapy may

provide a beneficial adjunct to dietary, activity, and behavioral modifications in selected

individuals, including: those with BMI ≥ 30 kg/m2 (obese) and no concomitant risk factors, or

those with BMI ≥ 27 kg/m2 (overweight) and comorbidities such as hypertension, dyslipidemia,

type 2 diabetes, coronary artery disease, and sleep apnea. Per NIH recommendations, the

initial goal of weight loss therapy is an approximately 10% reduction in body weight from

baseline, accomplished within a time frame of 6 months on treatment.

The growing view of obesity as a chronic disease that requires targeted treatment has spurred

industry-wide efforts to develop novel therapeutics. During the 60-year history of obesity drug

marketing, one of the biggest challenges has been to develop a drug that is: (1) effective in

promoting durable weight loss, (2) safe for long-term use, and (3) non habit-forming. Until

1996, all drugs approved for weight-loss indications by the FDA were labeled for short-term

use only (a few weeks). This was partly because obesity was not considered a chronic

condition, so the drugs were viewed as short-term jumpstarts to longer programs of diet and

exercise. Also, most of the early drugs were amphetamine derivatives with significant abuse

potential. As obesity became more prevalent during the 1980’s, the FDA began to recognize it

as a chronic condition requiring longer-term treatment. In 1996, the agency issued a draft



guidance requiring extensive safety data for one year or longer for new obesity drug

applications. Long-term safety is an especially crucial issue for contemporary obesity NDAs

since, despite the more stringent 1996 draft guidance, three out of the four obesity drugs

subsequently approved were found to be associated with serious safety issues post approval

and ultimately withdrawn from one or more major markets.

Poor Safety Record of Obesity Drugs

DrugYear

Approved

Approved

Duration Of UseComment

Desoxyn (methamphetamine) 1947 Short-term Black box warning for abuse potential

Preludin (phenmetrazine) 1956 Short-term Banned in Sweden and rarely prescribed elsewhere due to abuse

phentermine 1959 Short-term Label warns against combination use

Tenuate (diethylpropion) 1959 Short-term Label contraindicates combination use

Bontril (phendimetrazine) 1959 Short-term Rarely prescribed due to abuse potential

Didrex (benzphetamine) 1960 Short-term Label warns against combination use

Mazindol 1973 Short-term -

Fenfluramine 1973 Short-term Withdrawn in 1997 on valvulopathy risk

Redux (dexfenfluramine) 1996 Long-term Withdrawn in 1997 on valvulopathy risk

Meridia (sibutramine) 1997 Long-term Withdrawn in 2010 on CV risk

Xenical (orlistat) 1999 Long-term -

Acomplia (rimonabant) 2006 (EU) Long-term Withdrawn from EU in 2009 on suicidality risk Source: Cowen and Company

In 2007, the FDA revised the weight-loss drug draft guidance. The guidance now requires

Phase III placebo-controlled trials, with approximately 1,500 patients on placebo and 3,000

patients on drug for a period of at least one year to assess safety. The 2007 guidance defined

two efficacy endpoints, at least one of which should be met for a new drug candidate to be

considered effective: (1) ―mean efficacy‖ (statistically significant difference in mean weight loss

of at least 5% between therapy and placebo groups), and (2) ―categorical efficacy‖ (the

proportion of subjects losing ≥ 5% of body weight in the active drug group should be greater

than 35%, and at least double the proportion in the placebo group, with the difference between

groups being statistically significant).

Until recently, only a handful of FDA-approved prescription products were marketed, including

generic phentermine and Roche/GlaxoSmithKline’s Xenical (orlistat). Our clinical consultants

use these older medications in about 50% of their obesity patients, primarily because they are

only modestly efficacious (resulting in loss of 8-10 pounds, or approximately 5% of baseline

body weight) while also associated with poor safety and tolerability profiles. Because

phentermine and Xenical have questionable benefit/risk profiles and are not generally

reimbursed by payors, only 6MM of 160MM obese patients worldwide are treated. Of those,

only 50% are thought to be compliant with therapy. Although bariatric surgery and other

invasive procedures have gained wider acceptance and can result in significant weight loss,

these options remain reserved for those patients at the severe end of the obesity spectrum.

Hence, the overwhelming majority of obese patients are inadequately treated for their



condition. In this context, and with a difficult market history of weight-loss drugs stymied by

major safety issues, the FDA approved BELVIQ and Qsymia in 2012, after previously rejecting

both.

Current thinking on obesity reflects understanding that the affected population is not

necessarily homogenous. This perspective has been shared in a recent consensus report of

the Obesity Drugs Outcome Measures Dialogue Group, composed of academic and clinical

key opinion leaders, health advocacy leaders, industry representatives, and government (FDA,

CDC, NIH) observers. Beyond characterization based primarily on size (BMI), there is

recognition of an obesity spectrum, accounting for variations in health effects, functional

limitations, and psychosocial impairment. Patient stratification may be considered in three

groups: “Obese and Well,” “Obese with Risk Factors,” and “Obese and Sick.” Obese-Well

individuals have no related risks and no significant impairments. The Obese-Sick have obesity-

related comorbidities, with impairments of function or daily feeling. In the middle are those who

have no current comorbidities but carry specific risk factors for health and symptomatic effects.

Considering disease severity across a spectrum of obesity may help to clarify patient needs,

therapeutic goals, and acceptable risk levels—strategic factors which ultimately impact

treatment decisions.

Recent Developments in Obesity: Recognition and Legislation

In a September 2012 position statement (Mechanick JI et al., Endocrine Practice 2012), the

American Association of Clinical Endocrinologists (AACE) declared obesity to be a disease

“with multiple pathophysiological aspects, including genetic, environmental, physiological, and

psychological factors.” The AACE published a new, comprehensive management algorithm for

diabetes (Garber AJ et al., AACE Comprehensive Diabetes Management Algorithm 2013.

Endocrine Practice 2013) which incorporates obesity, pre-diabetes, and CV risk factor

management in May 2013. In particular, these guidelines specifically incorporate medical

therapy with approved weight loss drugs, including BELVIQ and Qsymia, first-line with lifestyle

modification for treatment of obese and overweight patients with complications such as

diabetes. These therapies are also considered as first-line treatment in the algorithm for pre-

diabetes management. As stated in the AACE Guidelines, “lifestyle optimization is

essential…However, such efforts should not delay pharmacotherapy, which can be initiated

simultaneously.”

In June 2013, the American Medical Association adopted a resolution introduced by the AACE,

and formally recognized obesity as a disease, “with multiple pathophysiological aspects

requiring a range of interventions to advance obesity treatment and prevention.” Also in June

2013, a bipartisan group in the U.S. Congress introduced legislation entitled the Treat and

Reduce Obesity Act of 2013 (H.R. 2415) for consideration in the House of Representatives.

This bill amends title XVIII (Medicare) of the Social Security Act to include information on

coverage of intensive behavioral therapy for obesity in patient handbooks. Furthermore, the

legislation provides reimbursement for this behavioral therapy. Finally, under the bill, there is

coverage with Medicare Part D (voluntary prescription benefit program) for obesity drugs used

to treat overweight individuals with one or more comorbidities.



BELVIQ’s Competition, Current and Future

1) The Incumbent: Vivus’ Qsymia

In July 2012, the FDA approved Qsymia, a controlled-release phentermine/ topiramate

combination, as an adjunct to a reduced-calorie diet and increased physical activity for chronic

weight management in adult patients with an initial BMI ≥ 30 kg/m2 (obese), or ≥ 27 kg/m2

(overweight) in the presence of at least one weight-related comorbidity, such as hypertension,

type 2 diabetes mellitus, or dyslipidemia. Per the label, Qsymia treatment is to be started at

low-dose (3.75 mg/23 mg phentermine/topiramate) daily for 14 days and then increased to the

recommended dose of 7.5 mg/46 mg (mid-dose). After 12 weeks on Qsymia mid-dose

treatment, if a patient has not lost at least 3% of baseline body weight, treatment should be

discontinued or escalated to Qsymia top-dose (15mg/92mg). After an additional 12 weeks on

Qsymia top-dose treatment, if a patient has not lost at least 5% of baseline body weight,

treatment should be discontinued.

In September 2012, Qsymia was launched in the U.S. In February 2013, the EMA confirmed its

original decision of 10/18/12 to decline approval for the MAA for Qsiva, the EU proposed

name. EMA indicated that a preapproval CVOT would be necessary to establish Qsiva’s long-

term safety.

Qsymia REMS Requirement

In granting approval for Qsymia, the FDA required a Risk Evaluation and Mitigation Strategy

(REMS) from Vivus, with the goal of informing prescribers and female patients of childbearing

age about potential teratogenic risks of Qsymia and the importance of pregnancy prevention,

as well as need to discontinue Qsymia in the event of pregnancy. The components of the

Qsymia REMS include a Medication Guide with patient-focused labeling, dispensed with every

prescription, as well as Elements to Assure Safe Use (ETASU), with assessments required at

6 months, 12 months, and annually thereafter. The ETASU are comprised by: 1) HCP

education and training, with maintenance of database of trained HCPs by Vivus, and 2)

certified home delivery pharmacy network, with certified pharmacies and pharmacy staff

training on REMS requirements. The ETASU for Qsymia does not include a patient registry,

patient enrollment, patient profile review, or pregnancy test requirement, though a test is

recommended.

REMS amendment approved: In April 2013, Vivus announced the approval by FDA of an

amendment and modification to the REMS program, which made Qsymia available through

certified retail pharmacies. The other components of the original Qsymia REMS program

remain unchanged and in place. Management indicated that the implementation process

includes completing wholesale distribution agreements, enrolling and training each pharmacy

location, and ensuring REMS-compliant database setup, as well as shipping and stocking of

product. On July 1, 2013, Vivus announced the availability of Qsymia in certified retail

pharmacies (approximately 8,000 Walgreens, Costco, and Duane Reade retail locations).



Qsymia Achieved Strong Efficacy in Its Phase III Program

The Qsymia Phase III program was comprised by four trials: EQUATE, a 28-week factorial

study conducted to confirm the contributions of phentermine and topiramate to Qsymia

efficacy; EQUIP and CONQUER, two 1-year studies; and SEQUEL, a 1-year extension study

of CONQUER. EQUATE and CONQUER were conducted under SPA with FDA.

Designs of the two pivotal phase III studies, EQUIP and CONQUER, were determined in

consultation with FDA and complied with the FDA Guidance for Industry “Developing Products

for Weight Management” relative to number of participants, enrolled populations, study

duration, and endpoints. The Qsymia Phase III trial program evaluated three dose levels

(phentermine/topiramate): low-dose (3.75 mg/23 mg), mid/recommended-dose (7.5 mg/46

mg), and top-dose (15 mg/92 mg).

Qsymia Phase III Program Summary

EQUATE (OB-301)* EQUIP (OB-302) CONQUER (OB-303) SEQUEL (OB-305)*

Number of patients 756 1,267 2,487 675

Duration 28 weeks 56 weeks 56 weeks 108 weeks (extension study)

Treatment groups

Qsymia 7.5/46 mg, Qsymia 15/92

mg, Topiramate 46 mg, Topiramate

92 mg, Phentermine 7.5 mg,

Phentermine 15 mg, Placebo

Qsymia 3.75/23 mg, Qsymia

15/92 mg, Placebo


mg, Placebo


mg, Placebo

Patient demographics

(BMI, kg/m2)

BMI 30-45; baseline weight 223

pounds

BMI ≥ 35, with no upper limit;

baseline weight 256 pounds

BMI 27-45 and ≥ 2 comorbidities

(HTN, dyslipidemia, diabetes,

abdominal obesity; baseline weight

227 pounds

BMI 27-45 and ≥ 2 comorbidities

(HTN, dyslipidemia, diabetes,

abdominal obesity; baseline weight

225 pounds

Mean BMI, kg/m2 36 42 37 36

Average age (years) 46 43 51 51-52

Female Proportion 79% 83% 70% 65%-70%

Ethnicity Caucasian (79%)Caucasian (80%)

African-American (16%-18%)

Caucasian (70%)


Caucasian (83%-87%)


Adjunct lifestyle/behavior

modification program


Data Announced December 2008 September 2009 September 2009 September 2010

Qsymia Low-Dose: 3.75/23mg (phentermine/topiramate) ; Qsymia Mid-Dose: 7.5/46mg; Qsymia High-Dose: 15/92mg

1) mean change in body weight from baseline


Standardized counseling on nutrition and exercise based on the LEARN weight management program, with monthly progress discussion

Source: Cowen and Company, *EQUATE and SEQUEL were not pivotal studies



Qsymia Efficacy Data

M e a n W e ig h t

L o s s (% )

Tre a tm e n t G ro u p

M e a n W e ig h t

L o s s (% )

P la c e b o G ro u p

M e a n W e ig h t

L o s s (% )

P la c e b o -

a d ju s te d

> 5 % W e ig h t L o s s





P la c e b o -

A d ju s te d

> 1 0 % W e ig h t

L o s s


> 1 0 % W e ig h t

L o s s


E Q U A TE (O B -3 0 1 ) -

Q s y m ia 1 5 m g p h e n /9 2 m g to p i; (n = 7 5 6 )9 .2 % 1 .7 % 7 .5 % 6 6 .0 % 1 5 .5 % 5 0 .5 % 3 8 .8 % 6 .8 %

E Q U IP (O B -3 0 2 ) -

Q s y m ia 1 5 m g p h e n /9 2 m g to p i; (n = 1 ,2 6 7 )1 0 .9 % 1 .6 % 9 .3 % 6 6 .7 % 1 7 .3 % 4 9 .4 % 4 7 .2 % 7 .4 %

S E Q U E L (O B -3 0 5 )-

Q s y m ia 1 5 m g p h e n /9 2 m g to p i; (n = 2 ,4 8 7 )1 0 .5 % 1 .8 % 8 .7 % 7 9 .3 % 3 0 .0 % 4 9 .3 % 5 3 .9 % 1 1 .5 %

C O N Q U E R (O B -3 0 3 ) -

Q s y m ia 1 5 m g p h e n /9 2 m g to p i; (n = 6 7 5 )1 0 .4 % 1 .8 % 8 .6 % 7 0 .0 % 2 1 .0 % 4 9 .0 % 4 8 .0 % 7 .0 %

E Q U A TE (O B -3 0 1 )-

Q s y m ia 7 .5 m g p h e n /4 6 m g to p ; (n = 7 5 6 )8 .5 % 1 .7 % 6 .8 % 6 2 .1 % 1 5 .5 % 4 6 .6 % 4 0 .8 % 6 .8 %

S E Q U E L (O B -3 0 5 )-

Q s y m ia 7 .5 m g p h e n /4 6 m g to p ; (n = 2 ,4 8 7 )9 .3 % 1 .8 % 7 .5 % 7 5 .2 % 3 0 .0 % 4 5 .2 % 5 0 .3 % 1 1 .5 %

C O N Q U E R (O B -3 0 3 ) -

Q s y m ia 7 .5 m g p h e n /4 6 m g to p ; (n = 6 7 5 )8 .4 % 1 .8 % 6 .6 % 6 2 .0 % 2 1 .0 % 4 1 .0 % 3 7 .0 % 7 .0 %

E Q U IP (O B -3 0 2 ) -

Q s y m ia 1 5 m g p h e n /9 2 m g to p i; (n = 1 ,2 6 7 )1 4 .4 % 2 .1 % 1 2 .2 % 8 3 .5 % 2 5 .5 % 5 8 .0 % 6 7 .7 % 1 3 .0 %

S E Q U E L (O B -3 0 5 )-

Q s y m ia 1 5 m g p h e n /9 2 m g to p i; (n = 2 ,4 8 7 )1 0 .7 % 2 .2 % 8 .5 % 7 9 .3 % 3 0 .0 % 4 9 .3 % 5 3 .9 % 1 1 .5 %

C O N Q U E R (O B -3 0 3 ) -

Q s y m ia 1 5 m g p h e n /9 2 m g to p i; (n = 6 7 5 )1 2 .4 % 1 .6 % 1 0 .8 % 8 5 .1 % 2 6 .2 % 5 8 .9 % 6 4 .3 % 9 .7 %

S E Q U E L (O B -3 0 5 )-

Q s y m ia 1 5 m g p h e n /9 2 m g to p i; (n = 2 ,4 8 7 )9 .3 % 2 .2 % 7 .1 % 7 5 .2 % 3 0 .0 % 4 5 .2 % 5 0 .3 % 1 1 .5 %

C O N Q U E R (O B -3 0 3 ) -

Q s y m ia 1 5 m g p h e n /9 2 m g to p i; (n = 6 7 5 )9 .6 % 1 .6 % 8 .0 % 7 4 .6 % 2 6 .2 % 4 8 .4 % 4 9 .1 % 9 .7 %

Q s ym ia L o w -D o s e : 3 .7 5 / 2 3 m g (p h e n t e rm in e / t o p ira m a t e ) ; Q s ym ia M id -D o s e : 7 .5 / 4 6 m g ; Q s ym ia T o p -D o s e : 15 / 9 2 m g

7 .5 m g p h e n /4 6 m g to p i (c o m p le te rs )

Q s y m ia 1 5 m g p h e n /9 2 m g to p i ( IT T )

Q s y m ia 7 .5 m g p h e n /4 6 m g to p i ( IT T )

Q s y m ia 1 5 m g p h e n /9 2 m g to p i (c o m p le te rs )


EQUATE Confirms Efficacy of Qsymia Over Phentermine and Topiramate Alone

EQUATE (OB-301) was a randomized, placebo-controlled, double-blind, multi-center, six-

month, Phase III factorial trial in 756 obese patients comparing weight loss with two doses of

Qsymia (mid-dose, 7.5/46 mg and top-dose, 15/92 mg), single agent phentermine and

topiramate at doses corresponding to those in the Qsymia dose combinations, and placebo.

Eligibility criteria included age ≤ 70 years and BMI 30-45 kg/m2. All participants were provided

standardized counseling based on the LEARN weight management program. LEARN is a 16-

week program incorporating tools for lifestyle, attitude, relationship, nutrition, and exercise

changes.



Baseline Demographics in EQUATE

Number of Patients 756

Average BMI, Kg/m2

36.2


Average Age, years 45.6


Mean Systolic BP, mm Hg 122

Mean Diastolic BP, mm Hg 79 Source: Cowen and Company, Vivus, FDA briefing document

This seven-arm study was conducted to demonstrate the contributions of each drug

component to the Qsymia weight loss effect, and to confirm the efficacy of Qsymia over

phentermine and topiramate alone.

The co-primary endpoints for the trial were mean weight loss from baseline and the proportion

of subjects achieving weight loss of 5% or more of body weight at 28 weeks. In order for

efficacy of a Qsymia dose to be determined, each of three pairwise comparisons, Qsymia dose

vs. each single agent and Qsymia dose vs. placebo, needed to reach the 5% significance level

for either co-primary endpoint.

EQUATE Trial Schematic

Source: Cowen and Company, FDA Briefing Document

Results from EQUATE were reported in December 2008. The trial demonstrated statistically

significant weight loss with both Mid-dose and Top-dose Qsymia compared to placebo. Also,



the contributions of phentermine and topiramate individually to Qsymia efficacy were

demonstrated. Furthermore, the efficacy of Qsymia over these components was shown.

1) Qsymia mid-dose vs. placebo: Patients treated with mid-dose Qsymia had mean weight

loss of 8.5% compared to 1.7% for those treated with placebo. This difference was statistically

significant (p<0.0001). 62% of the Qsymia mid-dose group had ≥ 5% weight loss compared

with 15.5% of the placebo group. This difference was also statistically significant (p<0.0001).

For both co-primary endpoints, the benchmark established by the factorial trial design was met

to show efficacy of the Qsymia mid-dose over placebo.

2) Qsymia mid-dose vs. phentermine 7.5 mg: Patients treated with mid-dose Qsymia had

mean weight loss of 8.5%, while those treated with phentermine 7.5 mg lost an average 5.5%

of body weight. This difference was statistically significant (p=0.0003), meeting the significance

level set in the factorial design to determine efficacy of the Qsymia mid-dose over phentermine

alone.

3) Qsymia mid-dose vs. topiramate 46 mg: Patients treated with mid-dose Qsymia had

mean weight loss of 8.5%, while those treated with topiramate 46 mg had average loss of

5.1%. This difference was statistically significant (p<0.0001), also meeting the significance

level set in the factorial design to determine efficacy of the Qsymia mid-dose over topiramate

alone.

4) Qsymia top-dose vs. placebo: Patients treated with top-dose Qsymia had mean weight

loss of 9.2% compared to 1.7% for those treated with placebo. This difference was statistically

significant (p<0.0001). 66% of the Qsymia top-dose group had ≥ 5% weight loss compared

with 15.5% of the placebo group, which was also a statistically significant (p<0.0001)

difference. For both co-primary endpoints, the benchmark established by the factorial trial

design was met to show efficacy of the Qsymia top-dose over placebo.

5) Qsymia top-dose vs. phentermine 15 mg: Patients treated with top-dose Qsymia had

mean weight loss of 9.2%, while those treated with phentermine 15 mg lost 6.1% of body

weight on average. This difference was statistically significant (p=0.0001), meeting the

significance level set in the factorial design to determine efficacy of the Qsymia top-dose over

phentermine alone.

6) Qsymia top-dose vs. topiramate 92 mg: Patients treated with top-dose Qsymia had mean

weight loss of 9.2%, while those treated with topiramate 92 mg had average loss of 6.4%. This

difference was statistically significant (p=0.0009), and again met the significance level set in

the factorial design to determine efficacy of the Qsymia top-dose over topiramate alone.



EQUATE: Efficacy Data

Key Endpoints Qsymia mid-

dose

Qsymia top-

dosePlacebo p-value

Phentermine

7.5mg

Phentermine

15mg

Topiramate

46mg

Topiramate

92mg

n (ITT-LOCF) n=103 n=103 n=103 n=104 n=106 n=102 n=105

Mean Weight Loss (%) (ITT-LOCF) 8.5% 9.2% 1.7% p<0.0001 5.5% 6.1% 5.1% 6.4%

≥5% weight loss (ITT-LOCF) 62.1% 66.0% 15.5% p<0.0001


EQUATE (OB-301) (n=756); (28 weeks)

Source: Cowen and Company, Vivus, FDA briefing document

Safety: Both doses were well tolerated. The most common adverse events were: paresthesia

(mid-dose: 15%, top-dose: 20%, placebo: 3%), dry mouth (mid-dose: 12%, top-dose: 18%,

placebo: 0%), constipation (mid-dose: 6%, top-dose: 11%, placebo: 6%), and altered taste

(mid-dose: 8%, top-dose: 15%, placebo: 0%). There were no significant differences in

depression and altered mood for either Qsymia dose group compared with placebo (mid-dose:

0.9%, top-dose: 1.9%, placebo: 1.8%).

Qsymia’s Pivotal Phase III Trials Successful

In September 2009, Vivus reported results from the two 56-week pivotal Phase III trials of

Qsymia, EQUIP (OB-302) and CONQUER (OB-303). In both trials, treatment with Qsymia met

efficacy benchmarks established by the FDA guidance for weight-loss therapy.

FDA guidance has delineated the primary efficacy benchmark for weight management drugs

as achievement of either a statistically significant difference in mean weight loss of at least 5%

between therapy and placebo groups, or a categorical loss of ≥ 5% of baseline body weight in

at least 35% of patients on therapy, which proportion should be approximately double that for

placebo.

EQUIP: Qsymia Efficacy in Morbidly Obese Patients

EQUIP was a randomized, placebo-controlled, double-blind phase III study evaluating two

doses of Qsymia in morbidly obese patients. Patients were randomized 2:1:2 to Qsymia 15/92

mg (top-dose), Qsymia 3.75/23 mg (low-dose), or placebo. Treatment initiation consisted of a

4-week blinded titration period, typically recommended with clinical topiramate use to minimize

adverse events, starting with the 3.75/23 mg dose and increasing weekly by 3.75/23 mg

increments to the assigned dose. Patients were then maintained at the randomized dose for 52

weeks and evaluated on a monthly basis. Eligibility criteria included: age 18-70 years, BMI ≥

35 kg/m2 with no upper limit, triglycerides ≤ 200 mg/dl on 0–1 lipid lowering medication, BP ≤

140/90 mm Hg on 0–2 antihypertensive medication(s), and fasting serum glucose level ≤ 110

mg/dl. All participants were provided standardized counseling based on the LEARN weight

management program. They were advised to reduce daily dietary intake by 500 kcal, to

increase water consumption, and to increase physical activity.



Baseline Demographics in EQUIP


Average BMI, Kg/m2

42





Mean Diastolic BP, mm Hg 77 Source: Cowen and Company, Vivus, FDA Briefing Document

The co-primary endpoints for the trial were mean weight loss from baseline and the proportion

of subjects achieving weight loss ≥ 5% of baseline body weight at 56 weeks.

The trial successfully met its co-primary endpoints at 56 weeks:

1) % average weight loss: Patients treated with Qsymia 15/92 mg had an average weight

loss of 10.9%, compared with 1.6% in the placebo group, for a placebo-adjusted average

weight loss of 9.3%. This result was statistically significant (p<0.0001) and met FDA’s efficacy

benchmark of at least a 5% difference in average weight loss between therapy and placebo.

For the low-dose Qsymia 3.75/23 mg group, patients had mean weight loss of 5.1% and

placebo-adjusted loss of 3.5%. This result was also statistically significant (p<0.0001) but did

not meet FDA’s efficacy benchmark for mean weight loss.

2) % of patients losing at least 5% of their weight: 66.7% of patients in the Qsymia 15/92

mg group lost at least 5% of baseline body weight, compared to 17.3% in the placebo group.

This improvement over placebo was statistically significant (p<0.0001), meeting the categorical

weight loss threshold specified in FDA’s guidance. In the low-dose Qsymia group, 44.9%

achieved ≥ 5% weight loss. This result, which was statistically significant (p<0.0001) compared

to placebo, also met the FDA benchmark for categorical weight loss efficacy.

Analysis of completers demonstrated placebo-adjusted average weight losses of 12.3% and

4.6% in the Qsymia top-dose and low-dose groups, respectively, with these differences from

placebo being statistically significant (p<0.0001). 83.5% and 59% of completers in the Qsymia

top-dose and low-dose groups, respectively, lost ≥ 5% of body weight, compared with 25.5%

of placebo patients.

In EQUIP, the lower limit for baseline BMI was 35 kg/m2, and there was no upper limit. The

BMI spectrum ranged from 35 kg/m2 to 79 kg/m2 in the trial. The ITT-LOCF analysis was

repeated with categorization of patients by BMI to evaluate any influence of baseline BMI on

the efficacy results. There was noted to be no significant interaction (p=0.8056) between BMI

category and efficacy result, meaning that weight-loss results did not vary significantly by

baseline BMI.



EQUIP: Efficacy Data

Key Endpoints Qsymia low-

dose

Qsymia top-

dosePlacebo p-value

n (ITT-LOCF) (n=234) (n=498) (n=498)

Mean Weight Loss (%) (ITT-LOCF) 5.1% 10.9% 1.6% p<0.0001



n (completers) n=137 n=297 n=239

Mean Weight Loss (%) (Completers) 6.7% 14.4% 2.1% p<0.0001

≥5% weight loss (Completers) 59.1% 83.5% 25.5% p<0.0001


Completion rate 59% 57% 47%

EQUIP (OB-302) (n=1267); (56 weeks)


Additionally, weight loss results with Qsymia were associated with general improvements,

compared with placebo, in anthropometric and cardiometabolic parameters, such as waist

circumference, blood pressure, triglycerides, cholesterol, and fasting glucose. The Qsymia top-

dose group had statistically significant improvements, while the Qsymia low-dose group had

numerically greater, but not always statistically significant, changes in these parameters

compared with the placebo group.

Blood pressure and heart rate: Mean systolic and diastolic blood pressures were decreased

from baseline at week 56 in both Qsymia dose groups, while increased in placebo patients.

Mean SBP was reduced by 1.8 mm Hg and 2.9 mm Hg in the Qsymia low-dose and top-dose

groups, respectively, compared to an increase of 0.9 mm Hg in the placebo group. Mean DBP

was lowered by 0.1 mm Hg and 1.5 mm Hg in the Qsymia low-dose and top-dose groups,

respectively, compared to an elevation of 0.4 mm Hg in the placebo group. Heart rate was

elevated in the Qsymia top-dose cohort (+1.2 bpm) at 56 weeks, but decreased in the Qsymia

low-dose (-0.3 bpm) and placebo (-0.2 bpm) groups.

EQUIP: Selected Secondary Endpoints

Qsymia low-

dosep-value

Qsymia top-

dosep-value Placebo

Waist circumference (cm) -5.6 0.0006 -10.9 <0.0001 -3.1

Systolic blood pressure (mm Hg) -1.8 0.0019 -2.9 <0.0001 0.9

Diastolic blood pressure (mm Hg) -0.1 0.4257 -1.5 0.0002 0.4

Change in heart rate (bpm) -0.3 0.9552 +1.2 0.083 -0.2

Total cholesterol (%) -5.4 0.0502 -6.0 0.0014 -3.5

Triglycerides (%) 5.2 0.2639 -5.2 <0.0001 9.1

Fasting glucose (mg/dL) 0.8 0.1209 -0.6 <0.0001 1.9 Source: Cowen and Company, Vivus, FDA briefing document

Safety: The most common adverse events included paresthesia, dry mouth, constipation,

dysgeusia, and insomnia, none of which caused study discontinuation in more than 1% of



patients. Assessment of depressive symptoms according to standardized rating scales showed

improvement in symptoms over time in all groups, with no significant differences among the

groups. Qsymia patients did not have increased suicidality compared with placebo patients.

The rates of serious AEs were the same, 2.5%, for all groups. Mood-related AEs, such as

depression, anxiety, and irritability, as well as cognition-related AEs, such as disturbance in

attention, occurred more frequently in the Qsymia top-dose group. Discontinuations related to

AEs were also more common in the Qsymia top-dose group (16%), compared with the low-

dose (11%) or placebo (8%) groups.

Teratogenicity: Out of 15 pregnancies in women treated with Qsymia, there were 3

spontaneous abortions, 3 elective abortions, and 9 healthy live births. There were no birth

defects or congenital malformations in these infants.



EQUIP Safety Data: Common Adverse Events

Qsymia Low-dose

n=240, n(%)

Qsymia Top-dose

n=511, n(%)

Placebo

n=513, n(%)

Paresthesia 10 (4.2) 96 (18.8) 10 (1.9)

Dry mouth 16 (6.7) 87 (17.0) 19 (3.7)

Constipation 19 (7.9) 72 (14.1) 35 (6.8)

Upper respiratory tract infection 38 (15.8) 63 (12.3) 56 (10.9)

Headache 25 (10.4) 61 (11.9) 52 (10.1)

Nasopharyngitis 30 (12.5) 46 (9.0) 37 (7.2)

Dysgeusia 3 (1.3) 43 (8.4) 5 (1.0)

Insomnia 12 (5.0) 40 (7.8) 25 (4.9)

Nausea 14 (5.8) 37 (7.2) 24 (4.7)

Sinusitis 18 (7.5) 37 (7.2) 28 (5.5)

Dizziness 7 (2.9) 29 (5.7) 21 (4.1)

Back pain 13 (5.4) 28 (5.5) 26 (5.1)

Bronchitis 16 (6.7) 28 (5.5) 22 (4.3)

Cough 8 (3.3) 26 (5.1) 18 (3.5)

Influenza 18 (7.5) 26 (5.1) 24 (4.7)

Depression 8 (3.3) 24 (4.7) 6 (1.2)

Diarrhea 12 (5.0) 24 (4.7) 23 (4.5)

Fatigue 12 (5.0) 23 (4.5) 17 (3.3)

Irritability 4 (1.7) 23 (4.5) 3 (0.6)

Vision blurred 15 (6.3) 23 (4.5) 16 (3.1)

Alopecia 5 (2.1) 22 (4.3) 5 (1.0)

Anxiety 7 (2.9) 19 (3.7) 6 (1.2)

Disturbance in attention 1 (0.4) 18 (3.5) 3 (0.6)

Hypoesthesia 2 (0.8) 17 (3.3) 4 (0.8)

Dry eye 2 (0.8) 12 (2.3) 4 (0.8)

Paresthesia oral 1 (0.4) 11 (2.2) 2 (0.4)

Dry skin 0 (0.0) 8 (1.6) 1 (0.2)

Anorexia 3 (1.3) 7 (1.4) 0 (0.0)

Serum bicarbonate decreased 0 (0.0) 7 (1.4) 1 (0.2)

Feeling jittery 3 (1.3) 7 (1.4) 1 (0.2)

Amenorrhea 0 (0.0) 6 (1.2) 0 (0.0)

Aphasia 0 (0.0) 6 (1.2) 0 (0.0)

Back injury 3 (1.3) 5 (1.0) 0 (0.0)

Serum potassium decreased 1 (0.4) 5 (1.0) 0 (0.0)

Hypogeusia 1 (0.4) 5 (1.0) 0 (0.0)

Parosmia 1 (0.4) 5 (1.0) 0 (0.0)

Osteoarthritis 4 (1.7) 2 (0.4) 0 (0.0)

Rhinitis 4 (1.7) 1 (0.2) 0 (0.0) Source: Cowen and Company, Vivus, FDA briefing document



CONQUER: Qsymia Efficacy in Obese Patients with Comorbidities

CONQUER was a randomized, placebo-controlled, double-blind phase III study evaluating two

doses of Qsymia in obese and overweight patients with co-morbidities. Patients were

randomized 2:1:2 to Qsymia 15/92 mg (top-dose), Qsymia 7.5/46 mg (mid-dose), or placebo.

Treatment initiation consisted of a 4-week blinded titration period, typically recommended with

topiramate use to minimize adverse events, starting with the 3.75/23 mg dose and increasing

weekly by 3.75/23 mg increments to the assigned dose. Patients were then maintained at the

randomized dose for 52 weeks and evaluated on a monthly basis. Eligibility criteria included:

age 18-70 years, BMI 27-45 kg/m2 with two or more comorbidities, including hypertension,

dyslipidemia, pre-diabetes/diabetes, or abdominal obesity (waist circumference ≥ 102 cm in

men and ≥ 88 cm in women). Type 2 diabetes could be managed with metformin monotherapy

or without medication. All participants were provided standardized counseling based on the

LEARN weight management program. They were given the LEARN manual at baseline and

advised to reduce daily dietary intake by 500 kcal, as well as to implement lifestyle changes.

Progress discussions with study staff occurred on monthly visits.

Baseline Demographics in CONQUER


Average BMI, Kg/m2

37





Mean Diastolic BP, mm Hg 81

Proportion with HTN 52%

Mean Triglycerides, mg/dL 162.5

Proportion with dyslipidemia 36%

Mean HbA1c, % 5.9

Proportion with Type 2 diabetes 16%

Proportion with > 3 comorbidities 51% Source: Cowen and Company, Vivus FDA Briefing Document

The co-primary endpoints of the study were mean percent weight loss and the proportion of

subjects achieving weight loss of 5% or more at 56 weeks.



loss of 9.8%, compared with 1.2% in the placebo group, for a placebo-adjusted average weight

loss of 8.6%. This result was statistically significant (p<0.0001) and met FDA’s efficacy

benchmark of at least a 5% difference in average weight loss between therapy and placebo.

For the mid-dose Qsymia 7.5/46 mg group, patients had mean weight loss of 7.8% and



placebo-adjusted loss of 6.6%, which was also statistically significant (p<0.0001) and met

FDA’s efficacy benchmark for mean weight loss.

2) % of patients losing at least 5% of their weight: 70% of patients in the Qsymia 15/92 mg

group lost at least 5% of baseline body weight, compared to 21% in the placebo group. This

improvement over placebo was statistically significant (p<0.0001), meeting the categorical

weight loss threshold specified in FDA’s guidance. In the Qsymia 7.5/46 mg group, 62%

achieved ≥ 5% weight loss. This result, which was also statistically significant (p<0.0001)

compared with placebo, also met the FDA benchmark for categorical weight loss efficacy.

Analysis of completers demonstrated placebo-adjusted average weight losses of 10.8% and

8% in the Qsymia top-dose and mid-dose groups, respectively, with these differences from

placebo being statistically significant (p<0.0001). 85% and 75% of completers in the Qsymia

top-dose and mid-dose groups, respectively, lost ≥ 5% of body weight, compared with 26% of

placebo patients.

CONQUER: Efficacy Data


dose

Qsymia top-

dose Placebo p-value

n (ITT-LOCF) (n=488) (n=981) (n=979)




n (completers) (n=338) (n=625) (n=557)





CONQUER (OB-303) (n=2487); (56 weeks)


Additionally, as in EQUIP, weight loss results with Qsymia were associated with significant

improvements in anthropometric and cardiometabolic parameters, such as waist

circumference, blood pressure, triglycerides, and total cholesterol. In hypertensive patients,

there were greater reductions in systolic blood pressure with Qsymia compared with placebo

(top-dose, -9 mm Hg (p<0.0001) and mid-dose, -7 mm Hg (p=0.0475) vs. placebo, -5 mm Hg).

Also, more patients in the Qsymia top- and mid-dose groups, 11% and 15%, respectively, than

5% in the placebo group were able to discontinue anti-hypertension medications. For patients

with type 2 diabetes, having mean baseline HbA1c level of 6.8% across all groups, there were

statistically significant reductions in HbA1c from baseline in the two Qsymia groups (-0.4% in

each group) versus placebo (-0.1%). More patients treated with placebo (15%) required an

increase in diabetes medications than did Qsymia patients (4% in each of the two dose

groups).

Blood pressure and heart rate: Mean systolic and diastolic blood pressures were decreased

from baseline at week 56 to a greater extent in both Qsymia dose groups than in placebo



patients. Mean SBP was reduced by 4.7 mm Hg and 5.6 mm Hg in the Qsymia mid-dose and

top-dose groups, respectively, compared to a decrease of 2.4 mm Hg in the placebo group.

Mean DBP was lower by 3.4 mm Hg and 3.8 mm Hg in the Qsymia mid-dose and top-dose

groups, respectively, compared to a reduction of 2.7 mm Hg in the placebo group. Heart rate

was elevated in the Qsymia top-dose cohort (+1.7 bpm) at 56 weeks, and relatively unchanged

in the Qsymia mid-dose (+0.1 bpm) and placebo (-0.1 bpm) groups.

CONQUER: Selected Secondary Endpoints

Qsymia mid-

dosep-value

Qsymia top-

dosep-value Placebo

Waist circumference (cm) -7.6 <0.0001 -9.2 <0.0001 -2.4

Systolic blood pressure (mm Hg) -4.7 0.0008 -5.6 <0.0001 -2.4

Diastolic blood pressure (mm Hg) -3.4 0.1281 -3.8 0.0031 -2.7

Change in heart rate (bpm) 0.1 0.92 +1.7 <0.0001 -0.1

Total cholesterol (%) -4.9 0.0345 -6.3 <0.0001 -3.3

Triglycerides (%) -8.6 <0.0001 -10.6 <0.0001 4.7

Fasting glucose (mmol/L) -0.01 0.0047 -0.07 <0.0001 0.13

Glycated hemoglobin (%) 0 <0.0001 -0.1 <0.0001 0.1

Change in HbA1c (%) in 388 patients (16%) with

baseline T2D (baseline HbA1c 6.8%, all groups)-0.4 0.0288 -0.4 0.0043 -0.1

Fasting insulin (pmol/L) -24 0.0004 -27.6 <0.0001 5.1

HOMA-IR -0.93 0.0007 -1.07 <0.0001 0.46

hsCRP (mg/L) -2.49 <0.0001 -2.49 <0.0001 -0.79 Source: Cowen and Company, Vivus, FDA briefing document

Safety: As seen in EQUIP, the most common adverse events included paresthesia, dry mouth,

constipation, dysgeusia, and insomnia. Psychiatric AEs, such as depression, anxiety, and

irritability, as well as cognitive AEs, such as disturbance in attention, occurred more frequently

in the Qsymia top-dose group. These AEs were noted earlier in treatment and generally

resolved with discontinuation of therapy. Assessment of depressive symptoms by standardized

rating scales showed no significant differences among the groups. Qsymia patients did not

have increased suicidality compared with placebo patients. The rates of serious AEs were

similar across groups (5% Qsymia top-dose, 3% Qsymia mid-dose, 4% placebo).

Discontinuations related to AEs were more common in the Qsymia top-dose group (19%),

compared with the mid-dose (12%) or placebo (9%) groups.



CONQUER Safety Data: Common Adverse Events

Qsymia Mid-dose

n=498, n(%)

Qsymia Top-dose

n=994, n(%)

Placebo

n=993, n(%)

Dry mouth 67 (13%) 207 (21%) 24 (2%)

Paraesthesia 68 (14%) 204 (21%) 20 (2%)

Constipation 75 (15%) 173 (17%) 59 (6%)

Upper respiratory tract infection 61 (12%) 133 (13%) 128 (13%)

Nasopharyngitis 53 (11%) 98 (10%) 86 (9%)

Dysgeusia 37 (7%) 103 (10%) 11 (1%)

Insomnia 29 (6%) 102 (10%) 47 (5%)

Headache 35 (7%) 101 (10%) 90 (9%)

Dizziness 36 (7%) 99 (10%) 31 (3%)

Sinusitis 34 (7%) 85 (9%) 67 (7%)

Back pain 28 (6%) 72 (7%) 49 (5%)

Nausea 18 (4%) 68 (7%) 42 (4%)

Fatigue 22 (4%) 67 (7%) 50 (5%)

Diarrhoea 32 (6%) 58 (6%) 48 (5%)

Blurred vision 20 (4%) 60 (6%) 36 (4%)

Urinary tract infection 26 (5%) 54 (5%) 37 (4%)

Arthralgia 23 (5%) 44 (4%) 54 (5%)

Bronchitis 22 (4%) 52 (5%) 43 (4%)

Depression 14 (3%) 39 (4%) 29 (3%)

Anxiety 9 (2%) 41 (4%) 21 (2%)

Irritability 13 (3%) 34 (3%) 8 (<1%)

Time to onset (days; median, IQR) 36 (8–138) 29 (17–118) 92 (26–164)

Duration (days; median, IQR) 35 (11–81) 29 (12–63) 44 (17–121)

Resolution among patients discontinuing drug 10/10 (100%) 33/37 (89%) 4/5 (80%)

Disturbance in attention 10 (2%) 35 (4%) 7 (<1%)

Time to onset (days; median, IQR) 23 (10–100) 25 (11–51) 22 (8–119)

Duration (days; median, IQR) 51 (8–149) 36 (18–81) 39 (13–76)

Resolution among subjects discontinuing drug 2/2 (100%) 21/21 (100%) 3/3 (100%)

Psychiatric adverse events

Cognitive adverse events


SEQUEL: Qsymia Efficacy Results Maintained in Extension of CONQUER

SEQUEL (OB-305) was a placebo-controlled, double-blind, 52-week extension of the

CONQUER study. In this extension, patients continued in their randomized arms from

CONQUER (2:1:2 Qsymia 15/92 mg, Qsymia 7.5/46 mg, or placebo). Patients were not

permitted to continue in SEQUEL if: 1) their BMI was ≤ 22 kg/m2 at the end of CONQUER, 2)

they were not continuously taking study drug for > 4 weeks at the end of CONQUER, or 3) they

had developed a condition which would interfere with compliance and further participation. All

participants continued to receive standardized counseling based on the LEARN weight

management program. Progress discussions with study staff occurred on monthly visits.



Baseline Demographics in SEQUEL

Number of Patients 676

Average BMI, Kg/m2

36





Mean Diastolic BP, mm Hg 80

Proportion with HTN 50%

Mean Triglycerides, mg/dL 156.6

Proportion with dyslipidemia 34%

Mean HbA1c, % 6

Proportion with Type 2 diabetes 22% Source: Cowen and Company, Vivus, FDA briefing document

The co-primary endpoints of the SEQUEL study, retained from CONQUER, were mean

percentage weight loss and the proportion of subjects achieving weight loss of 5% or more

from baseline (week 0 of CONQUER) to 108 weeks.



loss of 10.5%, compared with 1.8% in the placebo group, for a placebo-adjusted average

weight loss of 8.7%. This improvement was statistically significant (p<0.0001). For the mid-

dose Qsymia 7.5/46 mg group, patients had mean weight loss of 9.3% and placebo-adjusted

loss of 7.5%, which was also statistically significant (p<0.0001).

2) % of patients losing at least 5% of their weight: 79% of patients in the Qsymia 15/92 mg

group lost at least 5% of baseline body weight, compared to 30% in the placebo group. This

improvement over placebo was statistically significant (p<0.0001). In the Qsymia 7.5/46 mg

group, 75% achieved ≥ 5% weight loss. This result was also statistically significant (p<0.0001).

Analysis of completers demonstrated placebo-adjusted average weight losses of 8.5% and 7%

in the Qsymia top-dose and mid-dose groups, respectively, with these differences from

placebo again being statistically significant (p<0.0001).



SEQUEL: Efficacy Data


dose

Qsymia top-

dose Placebo p-value

n (ITT-LOCF) (n=153) (n=295) (n=227)




n (completers) (n=127) (n=245) (n=196)



SEQUEL (OB-305) (n=675); (108 weeks)


In SEQUEL, weight loss results with Qsymia continued to be associated with significant

improvements in anthropometric and cardiometabolic parameters, such as waist

circumference, triglycerides, and fasting insulin. For patients with type 2 diabetes, having mean

baseline HbA1c levels of 6.9% in the placebo and Qsymia top-dose groups and 7.3% in the

mid-dose group, there were reductions in HbA1c levels from baseline of 0.2% and 0.4% in the

two Qsymia groups, respectively, versus the placebo group (-0.04%), in which HbA1c was

essentially unchanged.

Blood pressure and heart rate: At week 108, mean systolic and diastolic BPs were

decreased from baseline by 3-5 mm Hg across all groups. The degree of BP reduction did not

differ significantly among the treatment arms. However, more Qsymia patients (16% top-dose

and 13% mid-dose) decreased use of anti-hypertensive medications compared with placebo

patients (8%). Heart rate was elevated in the Qsymia top-dose group (+1.7 bpm) at 108 weeks

to a slightly greater extent than in the Qsymia mid-dose (+1.3 bpm) and placebo (+0.4 bpm)

groups. There were no reported AEs associated with heart rate elevations, and no clinically

significant effects resulting from the elevations were observed.

SEQUEL: Selected Secondary Endpoints

Qsymia mid-

dosep-value

Qsymia top-

dosep-value Placebo

Waist circumference (cm) -9.8 <0.0001 -10.6 <0.0001 -3.6

Systolic blood pressure (mm Hg) -4.7 NS -4.3 NS -3.2

Diastolic blood pressure (mm Hg) -3.7 NS -3.5 NS -3.9

Change in heart rate (bpm) +1.3 - +1.7 - +0.4

Fasting insulin (lIU/mL) -5.3 0.0051 -5.2 0.0012 -2.6

Triglycerides (%) -12.5 <0.01 -13.7 <0.0001 0.4

Change in HbA1c (%) 0.01 0.0042 0 0.0003 0.2

Change in HbA1c (%) in 145 patients (22%) with

baseline T2D (baseline HbA1c 6.9-7.3%)-0.4 NS -0.2 NS -0.04




In April 2011, Vivus presented additional data from SEQUEL at the 60th Annual Scientific

Meeting of the American College of Cardiology (ACC). The ACC poster highlighted SEQUEL

data in two subgroups of patients, those with dyslipidemia and hypertension:

1) Hypertensive patients (SBP 140-160 mmHg or DBP 90-100 mmHg in non-diabetic patients,

and SBP 130-160 mmHg or DBP 85-100mmHg in diabetic patients) across all groups had BP

reductions over 108 weeks. Mean SBP decreased by 8.6 mm Hg and 6.9 mm Hg in the

Qsymia top-dose and mid-dose groups, respectively, with reduction of 6.7 mm Hg in placebo

patients. Mean DBP decreased by 5.8 mm Hg, 4.8 mm Hg, and 5.7 mm Hg in the Qsymia top-

dose, Qsymia mid-dose, and placebo groups, respectively. BP reductions in the Qsymia group

were not statistically significant compared to those in the placebo group.

2) Patients with dyslipidemia (triglycerides 200-400mg/dL or patients taking ≥ 2 lipid-lowering

agents) on Qsymia mid-dose and top-dose had reductions in triglyceride levels of 25.9% and

26.3%, respectively, compared with a 14.3% reduction in those on placebo (p=0.055 and

p=0.015, respectively).

3) Patients with dyslipidemia on Qsymia mid-dose and top-Dose had improvements in HDL

cholesterol levels of +11.4% and +16.7%, respectively, compared with a +9.1% increase in

placebo patients (NS and p<0.015, respectively).

Safety: The AEs occurring during the SEQUEL second year extension were similar to those

observed in CONQUER, but the incidence of individual AEs was lower in the second year

compared with the first year. The most common AEs included paresthesia, dry mouth,

constipation, dysgeusia, and upper respiratory tract infection. Rates of depression-related AEs

were comparable in placebo and Qsymia top-dose patients (8% each) and lower in the mid-

dose group (4%). Qsymia patients did not have increased suicidality compared with placebo

patients. The rates of serious AEs were similar across groups (8% Qsymia top-dose, 6%

Qsymia mid-dose, 6% placebo). Discontinuations related to AEs by week 108 were also similar

across the groups: Qsymia top-dose group (4.4%), mid-dose (4.5%), and placebo (3%).

Teratogenicity: During the 108 weeks of CONQUER and SEQUEL, there were 2 pregnancies,

with one pregnancy carried to term by a patient treated with Qsymia 15/92 mg. The infant was

born healthy, with no congenital malformations observed.



SEQUEL Safety Data: Common Adverse Events

Qsymia Mid-dose

(n=153)

Qsymia Top-dose

(n=295)

Placebo

(n=227)

Qsymia Mid-dose

(n=153)

Qsymia Top-dose

(n=295)

Placebo

(n=227)

Constipation 25 (16.3) 62 (21.0) 16 (7.1) 11 (7.2) 12 (4.1) 7 (3.1)

Paraesthesia 21 (13.7) 62 (21.0) 6 (2.6) 1 (0.7) 10 (3.4) 0 (0.0)

Dry mouth 21 (13.7) 59 (20.0) 5 (2.2) 1 (0.7) 4 (1.4) 1 (0.4)

Upper respiratory tract infection 23 (15.0) 55 (18.6) 47 (20.7) 26 (17.0) 45 (15.3) 42 (18.5)

Nasopharyngitis 20 (13.1) 39 (13.2) 35 (15.4) 13 (8.5) 26 (8.8) 26 (11.5)

Dysgeusia 18 (11.8) 39 (13.2) 4 (1.8) 1 (0.7) 3 (1.0) 0 (0.0)

Sinusitis 17 (11.1) 39 (13.2) 19 (8.4) 12 (7.8) 28 (9.5) 18 (7.9)

Headache 8 (5.2) 28 (9.5) 21 (9.3) 4 (2.6) 12 (4.1) 6 (2.6)

Insomnia 12 (7.8) 24 (8.1) 15 (6.6) 9 (5.9) 11 (3.7) 8 (3.5)

Diarrhea 14 (9.2) 21 (7.1) 12 (5.3) 3 (2.0) 11 (3.7) 3 (1.3)

Back pain 11 (7.2) 21 (7.1) 19 (8.4) 9 (5.9) 15 (5.1) 7 (3.1)

Dizziness 9 (5.9) 20 (6.8) 6 (2.6) 2 (1.3) 1 (0.3) 2 (0.9)

Nausea 5 (3.3) 19 (6.4) 13 (5.7) 10 (6.5) 4 (1.4) 4 (1.8)

Bronchitis 9 (5.9) 17 (5.8) 8 (3.5) 8 (5.2) 10 (3.4) 7 (3.1)

Fatigue 7 (4.6) 17 (5.8) 11 (4.9) 2 (1.3) 4 (1.4) 2 (0.9)

Procedural pain 7 (4.6) 17 (5.8) 6 (2.6) 8 (5.2) 14 (4.7) 4 (1.8)

Arthralgia 13 (8.5) 13 (4.4) 20 (8.8) 7 (4.6) 16 (5.4) 14 (6.2)

Influenza 11 (7.2) 13 (4.4) 11 (4.9) 10 (6.5) 19 (6.4) 8 (3.5)

Urinary tract infection 8 (5.2) 13 (4.4) 11 (4.9) 14 (9.2) 18 (6.1) 13 (5.7)

Gastroenteritis 3 (2.0) 12 (4.1) 12 (5.3) 2 (1.3) 9 (3.1) 6 (2.6)

Weeks 56-108; n(%)Weeks 0–56; n(%)


Qsymia Safety

Across the Qsymia clinical trial program, AEs generally occurred as expected and were

consistent with side effects of the individual component drugs. In the 1-year cohort of patients,

the most common AEs across Qsymia mid-dose and top-dose patients were paresthesias, dry

mouth, and constipation. Discontinuations resulting from treatment-emergent AEs were more

frequent in the Qsymia groups, 17% (top-dose) and 12% (mid-dose), compared with placebo

(8%). The rate of serious AEs was similar across the groups: 4% (top-dose), 3% (mid-dose),

3% (placebo). There were no serious psychiatric or cognitive AEs with Qsymia treatment. AE

profiles in the second year were consistent with those during the first year, but with overall

lower rates. There were no new or unexpected AEs observed during the second year.



Qsymia Phase III Safety Data (1-year Cohort)

Placebo

(n=1,561)

Qsymia Low-

dose

(n=240)

Qsymia Mid-

dose

(n=498)

Qsymia Top-

dose

(n=1,580)

Paresthesia 1.9% 4.2% 13.7% 19.9%

Headache 9.3% 10.4% 7.0% 10.6%

Dizziness 3.4% 2.9% 7.2% 8.6%

Dysgeusia 1.1% 1.3% 7.4% 9.4%

Hypoesthesia 1.2% 0.8% 3.6% 3.7%

Disturbance in Attention 0.6% 0.4% 2.0% 3.5%

Insomnia 4.7% 5.0% 5.8% 9.4%

Depression 2.2% 3.3% 2.8% 4.3%

Anxiety 1.9% 2.9% 1.8% 4.1%

Constipation 6.1% 7.9% 15.1% 16.1%

Dry Mouth 2.8% 6.7% 13.5% 19.1%

Nausea 4.4% 5.8% 3.6% 7.2%

Diarrhea 4.9% 5.0% 6.4% 5.6%

Dyspepsia 1.7% 2.1% 2.2% 2.8%

Gastroesophageal Reflux Disease 1.3% 0.8% 3.2% 2.6%

Paresthesia Oral 0.3% 0.4% 0.6% 2.2%

Fatigue 4.3% 5.0% 4.4% 5.9%

Irritability 0.7% 1.7% 2.6% 3.7%

Thirst 0.7% 2.1% 1.8% 2.0%

Chest Discomfort 0.4% 2.1% 0.2% 0.9%

Palpitations 0.8% 0.8% 2.4% 1.7%

Psychiatric Disorders

Gastrointestinal Disorders

General Disorders and Administration Site Conditions

Cardiac Disorders

Nervous System Disorders


Both the Initial Ad Com Panel and the FDA Rejected Qsymia in 2010...

On July 15, 2010, the FDA's Endocrinologic and Metabolic Drugs Advisory Committee voted

10-6 against recommending Qsymia for approval. The advisory committee concluded that

Qsymia’s one-year data did not adequately represent the drug's long-term use, and that

Qsymia had not been sufficiently examined in patients with cardiovascular disease. The FDA

and the advisory committee focused almost exclusively on Qsymia's safety profile, particularly

cardiovascular risk, teratogenicity, cognitive AEs, neuropsychiatric AEs, and metabolic

acidosis. Vivus presented data adequate to assuage the panel on the psychiatric, cognitive,

and metabolic acidosis issues, but the cardiovascular data presented were insufficient to judge

CV outcomes and more teratogenicity data were deemed to be needed.

On October 28, 2010, Vivus announced receipt of a Complete Response Letter from the FDA.

The CRL requested: (1) a comprehensive assessment of topiramate’s and Qsymia’s



teratogenic potential, (2) evidence that the elevation in heart rate observed in Qsymia’s trials

does not increase the risk for MACE, and (3) the results of the two-year SEQUEL trial. At a

January 2011 meeting with the FDA, Vivus was asked to perform an analysis of existing

healthcare databases (the FORTRESS study) to determine the incidence of oral clefts in

offspring of women treated with topiramate for migraine prophylaxis.

Qsymia Post Hoc CV Risk Analysis

In November 2010, at the American Heart Association meeting, Vivus presented a poster

entitled “Low-Dose, Controlled-Release Phentermine/Topiramate Significantly Improves

Reynolds 10-Year Risk Score In Obese Women And Men.”

The Reynolds Risk Score is designed as a rough predictive measure of heart attack, stroke, or

major heart disease over the next 10 years. The risk score is calculated by taking into account

gender, age, blood pressure, smoking history, cholesterol levels, high-sensitivity C-reactive

protein (hsCRP) level as a measure of inflammation, and family history. The Reynolds test was

validated in both female and male populations over a 10-year period to evaluate the

development factors for heart attack, stroke, angioplasty, coronary artery bypass surgery, or

mortality due to heart disease.

The AHA presentation highlighted 56-week modified Reynolds Risk Score data pooled from

the Phase III EQUIP and CONQUER studies of Qsymia in a total of 3,652 patients (2,711

women, 941 men). Reynolds Risk Score data were collected for patients at baseline and at the

conclusion of the trials (56 weeks), including gender, age, smoking status, systolic BP, family

history of early CVD, total and HDL cholesterol measurements, hsCRP levels, and diabetic

status (for women only). The Reynolds Risk Score calculator was used to measure the change

in relative risk of a CV event over 10 years between baseline and week 56. In 3,652 patients

analyzed, weight loss with Qsymia in all groups, except for the low-dose Qsymia group in men,

was associated with statistically significant reductions in 10-year Reynolds Risk Score from

baseline to week 56 (p<0.05). Least squares mean percent change analysis showed risk

decline of 5.4%-16.3% in the Qsymia-treated groups, and risk increase by 4.0%-6.1% in the

placebo group. Because the modified Reynolds Risk Score calculator used in this analysis is

driven by systolic BP and total and HDL cholesterol measurements, which improve with weight

loss, this was an expected outcome.



Qsymia Reynolds Risk Score (RRS) Data Summary (EQUIP/CONQUER)

RRS Analysis low-dose Qnexa mid-dose Qnexa high-dose Qnexa placebo

n=193 n=341 n=1,084 n=1,093

baseline mean RRS 1.24 3.06 2.51 2.65

mean change RRS (SD) -0.12* (0.64) -0.65* (1.86) -0.55* (2.09) -0.13 (1.76)

least squares mean % change RRS -6.80*,Ŧ

-13.64*,Ŧ

-16.27*,Ŧ

3.97*

RRS Analysis low-dose Qnexa mid-dose Qnexa high-dose Qnexa placebo

n=39 n=147 n=383 n=372

baseline mean RRS 5.12 7.67 6.54 6.70

mean change RRS (SD) -0.36 (1.65) -1.15* (3.01) -1.23* (3.24) -0.20 (3.00)

least squares mean % change RRS -8.88Ŧ

-5.40*,Ŧ

-11.78*,Ŧ

6.06*

*p<0.05 vs baseline; Ŧp<0.05 vs placebo

Women (n=2,711)

Men (n=941)

Source: Cowen and Company, AHA 2010 Company Data Presentation

While the 2010 panel members were satisfied with Qsymia's efficacy profile, they were

concerned about the lack of CV outcomes data and the relatively short safety database (12

months) available for a drug that would be used by high CV risk patients for many years. Even

with the addition of the two-year SEQUEL data, Qsymia’s dataset was considered lacking in

long-term safety data for patients with elevated CV risk.

Pooled Analysis of Blood Pressure and Heart Rate Data

In a pooled analysis of CV data from the Qsymia clinical trial program, mean systolic and

diastolic BPs were decreased from baseline at week 56 in all three Qsymia dose groups as

well as in the placebo group. Mean SBP was reduced by 3.3 mm Hg, 5.2 mm Hg, and 5.2 mm

Hg in the Qsymia low-dose, mid-dose, and top-dose groups, respectively, compared to a

decrease of 2.1 mm Hg in the placebo group. Mean DBP was lower by 0.9 mm Hg, 3.3 mm

Hg, and 2.9 mm Hg in the Qsymia low-dose, mid-dose, and top-dose groups, respectively,

compared to a reduction of 1.9 mm Hg in the placebo group. Heart rate was elevated in all

three Qsymia dose cohorts by an average of +1.3 bpm (low-dose), +0.6 bpm (mid-dose), and

+1.6 bpm (top-dose) at 56 weeks, while there was no overall change in heart rate for the

placebo group.



Qsymia: Pooled CV Safety Data

Qsymia Low-

dose

(n=234)

Qsymia Mid-

dose

(n=488)

Qsymia Top-

dose

(n=1,553)

Placebo

(n=1,532)

Systolic blood pressure, mm Hg

Mean change -3.3 -5.2 -5.2 -2.1

Difference from placebo (mmHg) -1.20 -3.10 -3.10

Diastolic blood pressure, mm Hg

Mean change -0.9 -3.3 -2.9 -1.9

Difference from placebo (mmHg) 1.00 -1.40 -1.00

Heart rate, bpm

Mean change +1.3 +0.6 +1.6 0.0

Difference from placebo (bpm) +1.30 +0.60 +1.60


What About Teratogenicity? Top-Line FORTRESS Data Look OK

While the July 15, 2010 EMDAC panel was satisfied with Qsymia's efficacy profile, the panel

discussion focused on five key safety issues: psychiatric AEs, cognitive AEs, metabolic

acidosis, teratogenicity, and cardiovascular AEs. The committee appeared to conclude that the

psychiatric AEs, the cognitive AEs, and the metabolic acidosis risks of Qsymia were

manageable and could be handled with label warnings. The committee was split on

teratogenicity, but it appeared that a Pregnancy Category X designation and a strict REMS

program might be sufficient. In January 2011, the FDA requested that Vivus provide additional

analyses of the historical teratogenicity issues associated with topiramate, particularly oral

clefts in the offspring of pregnant women treated with topiramate for migraine prophylaxis.

Upon agreement with the FDA, Vivus is conducting a retrospective study of medical claims

databases (the FORTRESS study) to measure the teratogenic risk for the topiramate

component of Qsymia. Top-line data from the FORTRESS study were reported in December

2011. Below, we have summarized the preliminary data from FORTRESS and the smaller

Wolter Kluwer studies conducted by Vivus, along with listing oral cleft prevalence rates and risk

ratios from the North American and the UK Epilepsy and Pregnancy Registries. We view the

impact of the top-line FORTRESS data as neutral to incrementally positive for Qsymia, since

they point to a risk ratio (1.88-5.44X) within the known range for topiramate. We point investors

to the small subset of the Total Topiramate Cohort that was composed of women exposed to

topiramate polytherapy; in that group, prevalence of oral clefts was much higher, as was the

associated increased risk ratio (6-14X).



February 2012: FDA AdCom Recommends Approval With Post-Approval CVOT

Requirement

At the February 2012 FDA advisory committee, a number of panel members expressed serious

concerns about Qsymia’s CV safety profile. However, given the lack of available treatment

options and the impact of obesity and its comorbidities in patients, the panel recommended

that a post-approval CVOT would be sufficient to rule out CV risk, voting 20-2 in favor of

Qsymia’s approval.

2012 Saw a Change of Heart at the FDA for Obesity Drugs

In July 2012, the FDA approved Qsymia for the treatment of obesity. As part of its post-

marketing commitment, Vivus is required to complete 10 post-marketing requirements,

including a CVOT.

According to the company’s latest guidance, Vivus will conduct a post-approval CVOT, known

as AQCLAIM (A Qsymia CardiovascuLAr morbIdity and Mortality), which will enroll

approximately 11,000 patients with documented CV risk (1/3 high-risk and 2/3 low-risk

patients) at 300 sites worldwide. This randomized, double-blind, placebo-controlled,

multicenter trial will evaluate the effect of long-term Qsymia treatment on incidence of MACE,

and will be designed to show superiority of Qsymia over placebo (16-20% risk reduction).

Approximately 630 events will be needed to complete the trial, and based on a 2% event rate

per year, the company guided that the trial could be completed in approximately 4.5 years. In

September 2013, Vivus indicated that patient enrollment in AQCLAIM is anticipated to begin in

1Q14.

What about Europe?

In December 2010, Vivus filed a MAA with the EMA for Qsiva, the proposed name for Qsymia

in Europe. In May 2011, the company received the EMA’s 120-day list of questions from the

CHMP, which included issues that were similar to those raised by the FDA. Vivus submitted its

response to the 120-day questions in the fourth quarter of 2011. In January 2012, Vivus

received the 180-day List of Outstanding Issues from the CHMP and submitted its response to

these issues in April 2012. In September 2012, Vivus announced that, based on preliminary

feedback from EMA's CHMP, it expects a negative decision on the Qsiva MAA. In October

2012, Vivus announced that it had received the formal opinion from EMA’s CHMP,

recommending against approval of Qsiva. According to the company, the rejection was due to

concerns about potential CV and CNS effects following long-term use, teratogenic potential,

and concerns about inappropriate use of the drug.

In February 2013, Vivus announced that the EMA confirmed its original decision of 10/18/12 to

decline approval for the MAA for Qsiva. EMA indicated that a pre-approval CVOT would be

necessary to establish Qsiva’s long-term safety.



EU approval pushed back a minimum of 2-3 years: Management previously indicated that

the most likely scenario would involve proceeding with the CVOT required for the US, and re-

engaging EMA with discussions about possibly re-filing based on interim CVOT data, hoping

for an outcome similar to the Contrave situation (Orexigen) with the LIGHT study in the US. In

September 2013, Vivus announced the submission of a request to EMA for scientific advice

regarding use of a pre-specified interim analysis of AQCLAIM in support of the Qsiva MAA

resubmission. The company indicated that the anticipated 1Q14 date for initiation of enrollment

in AQCLAIM has been chosen “to accommodate advice” from EMA.

Qsymia’s IP Estate Controversial

Qsymia’s intellectual property estate has been the subject of recent controversy. Qsymia is

covered by patents and patent filings in the U.S., Europe, and international markets. The key

U.S. patent (#7,056,890 B2, Najarian patent) covering Qsymia’s use was issued in June 2006.

This patent, along with other patent applications, claims a method-of-use combining a

sympathomimetic agent (i.e., phentermine) and an anticonvulsant (i.e., topiramate) for the

treatment of obesity. This patent also covers phentermine doses of 5-15mg and topiramate

doses of 100-200mg.

Our Consultants Believe That JNJ’s “Shank” Patent Could Be an Issue…But a

Settlement Is the Most Likely Outcome

J&J owns a method-of-use patent for Topamax (topiramate) (U.S. patent #6,071,537, the

―Shank‖ patent), which makes broad claims regarding treatment of obesity ―comprising‖ the

use of topiramate. It also specifically claims therapeutically effective doses of topiramate from

50 to 400mg. The patent claiming composition-of-matter of Topamax expired in September

2008 and thus does not present a commercialization barrier for Qsymia.

According to our consultants, the Qsymia Najarian patent estate could potentially be seen as

infringing on the J&J ―Shank‖ patent, which expires in 2017. Given that J&J is not marketing

topiramate for the treatment of obesity, the company is unlikely to be able to claim irreparable

harm. We see a royalty settlement between Vivus and J&J as the most likely eventual

outcome.



2) On Deck: Orexigen’s Contrave

Contrave consists of a fixed-dose combination of sustained-release (SR) bupropion and a

proprietary SR version of naltrexone designed for improved tolerability. These individual drugs

that have been approved separately for non-obesity indications and are sold as generics in the

US.

The arcuate nucleus of the hypothalamus plays a significant role in the regulation of body

weight. In the arcuate nucleus, neurons which produce pro-opiomelanocortin (POMC) release

both α-melanocyte stimulating hormone (α-MSH) and β-endorphin. POMC activation results in

an anorectic effect mediated by α-MSH at melanocortin receptors. A negative autoinhibitory

feedback loop is provided by β-endorphin acting at opioid receptors on POMC neurons.

Bupropion, a chemical aminoketone, is a non-tricyclic antidepressant that is widely used for

depression (approved in the US in 1985) and smoking cessation (approved in the US in 1997).

The primary action of bupropion is considered to be re-uptake inhibition of dopamine and

norepinephrine. Bupropion therapy is known to be associated with modest weight reduction.

Similar to endogenous signals causing weight loss, bupropion appears to increase POMC

firing, ultimately leading to decreased appetite and increase in energy expenditure.

Naltrexone is a non-selective opioid receptor antagonist used in the treatment of opioid

dependence (approved in the US in 1984) and alcohol addiction (approved in the US in 1995).

It is believed that naltrexone inhibits the reinforcement effects of addictive substances by

blocking neural reward pathways. It is possible that β-endorphin may be one compensatory

mechanism limiting long term efficacy of weight loss therapy. By blocking opioid receptors,

naltrexone interferes with the inhibitory action of β-endorphin, which allows POMC firing to be

unchecked. Therefore, naltrexone should augment the effect of bupropion on appetite

suppression.

The synergistic combination of bupropion and naltrexone in Contrave is meant to generate

more robust and durable weight loss. In particular, Orexigen anticipates that, in addition to

causing weight loss, this combination may be especially effective for reduction of food

cravings, which are believed to be governed by central reward systems.

Contrave: Proposed Indication

The proposed indication for Contrave is the management of obesity, including weight loss and

maintenance of weight loss, in conjunction with lifestyle modification. Obese adults with initial

body mass index (BMI) ≥ 30 kg/m2 and overweight adults (BMI ≥ 27 kg/m2) who have one or

more concomitant risk factors, such as diabetes, dyslipidemia, or hypertension, comprise the

target population. The recommended daily dose of Contrave is 32 mg naltrexone/360 mg

bupropion (NB32), administered as 16 mg naltrexone/180 mg bupropion twice daily.

.



Contrave: Clinical Data Summary

COR: Contrave’s Successful Phase III Program

In July 2009, Orexigen successfully completed four Phase III trials with Contrave, a

development program termed COR (Contrave Obesity Research). This program met the

requirements detailed in the FDA’s weight management guidance for one-year studies,

adequate patient exposure, efficacy endpoints, and appropriate target populations consisting of

obese and overweight patients with comorbidities, including type 2 diabetes. Four 56-week

trials evaluated a 360 mg daily dose of bupropion SR paired with 16 mg or 32 mg naltrexone

SR doses. The co-primary endpoints of each trial were mean percentage change in body

weight from baseline, and proportion of subjects with categorical ≥ 5% weight loss from

baseline. Secondary endpoints included proportion of subjects with categorical ≥ 10% weight

loss, weight-related cardiometabolic parameters, and impact of weight on QOL. The modified

intent-to-treat (mITT) population, comprised by all randomized patients with at least one post-

baseline measurement while on study drug, was analyzed for primary efficacy.

Contrave’s Phase III Program: COR (Contrave Obesity Research)

COR-BMOD

(formerly NB-302)

COR-I

(formerly NB-301)

COR-II

(formerly NB-303)

COR-Diabetes

(formerly NB-304)

Number of patients 793 1,742 1,496 505

Duration 1 year 1 year 1 year 1 year

Treatment groupsContrave32, Placebo

Contrave32,

Contrave16,

Placebo

Contrave32, PlaceboContrave32, Placebo

Patient demographics BMI 27-45 kg/m2

Comorbidities for inclusion Type 2 diabetes

Mean baseline weight, lbs 232

Mean BMI, kg/m2 36-37 36 36 36

Average age (years) 46 44 44 54

Female Proportion 90% 85% 85% 56%

EthnicityCaucasian (70%)


Caucasian (75%)


Caucasian (84%)


Caucasian (79%)


Adjunct lifestyle/behavior modification

program

Intensive 90 min group meetings weekly for 16

weeks, then every other week for 12 weeks,

then monthly (28 total sessions)


Data Announced January 2009 July 2009 July 2009 July 2009

BMI 30-45 kg/m2 or BMI 27-45 kg/m

2 with at least 1 comorbidity

Required controlled hypertension, dyslipidemia, or both

220

Instruction on diet and advice on lifestyle/behavior modification, including exercise instruction, at baseline and

weeks 12/24/36/48

1) mean weight loss from baseline

2) proportion of patients > 5% weight loss

Source: Cowen and Company, Orexigen Therapeutics



Efficacy Data From Contrave's Four Phase III Trials

Mean Weight

Loss (%)

Treatment Group

Mean Weight

Loss (%)

Placebo Group

Mean Weight Loss

(%)

Placebo- adjusted

>5% Weight

Loss

Treatment

Group

>5% Weight

Loss

Placebo Group

>5% Weight Loss

Placebo-

Adjusted

>10% Weight

Loss

Treatment Group

>10% Weight

Loss

Placebo Group

>10% Weight

Loss

Placebo-

Adjusted

COR-BMOD (NB-302);

Contrave 32; (n=793)9.3% 5.1% 4.2% 66.4% 42.5% 23.9% 41.5% 20.2% 21.3%

COR-I (NB-301);

Contrave 32; (n=1,742)6.1% 1.3% 4.8% 48.0% 16.4% 31.6% 24.6% 7.4% 17.2%

COR-II (NB-303);

Contrave 32; (n=1,496)6.5% 1.9% 4.6% 55.6% 17.5% 38.1% 27.3% 7.0% 20.3%

COR-Diabetes (NB-304);

Contrave 32; (n=505)5.0% 1.8% 3.2% 44.5% 18.9% 25.6% 18.5% 5.7% 12.8%

COR-BMOD (NB-302);

Contrave 32; (n=793)11.5% 7.3% 4.2% 80.4% 60.4% 20.0% 55.2% 30.2% 25.0%

COR-I (NB-301);

Contrave 32; (n=1,742)8.1% 1.8% 6.3% 61.8% 23.1% 38.7% 34.5% 10.7% 23.8%

COR-II (NB-303);

Contrave 32; (n=1,496)7.8% 2.4% 5.4% 68.8% 22.3% 46.5% 35.7% 9.4% 26.3%

COR-Diabetes (NB-304);

Contrave 32; (n=505)5.9% 2.2% 3.7% 53.1% 24.0% 29.1% 26.3% 8.0% 18.3%

Contrave 32 mg naltrexone/360 mg bupropion (modified-ITT)

Contrave 32 mg naltrexone/360 mg bupropion (completers)


COR-BMOD: First Phase III Trial Meets One of Two FDA Efficacy Benchmarks

In January 2009, Orexigen reported data from the first of four pivotal trials of Contrave, the NB-

302 (COR-BMOD) study. In this 56-week study, both Contrave treatment and placebo were

combined with intensive group behavior modification (BMOD), a program of diet, exercise, and

behavior therapy. Patients were randomized 1:3 to placebo or treatment with 32 mg sustained-

release (SR) naltrexone + 360 mg SR bupropion (Contrave32). The study included a 3-week

dose escalation, starting with one-quarter of the full dose, which was increased weekly until the

full dose was reached by week 4. Eligibility criteria in the trial included: age 18-65 years, and

BMI 30-45 kg/m2 or 27-45 kg/m2 with controlled hypertension and/or dyslipidemia. Exclusion

criteria included diabetes mellitus as well as current smoking, or tobacco/nicotine use within 6

months before screening. The intensive behavior modification program was delivered to

groups of 10-20 participants by registered dieticians, behavioral psychologists, or exercise

specialists. Group meetings of 90 minutes, including a weigh-in, occurred weekly for 16 weeks,

then every other week for 12 weeks, and then monthly, for a total of 28 sessions. Patients were

prescribed a diet of 1,200 kcal/day to 2,000 kcal/day, depending on body weight, and were

encouraged to gradually increase to 180 min/week of moderate physical activity in the first 6

months of the trial.

The trial successfully met its co-primary endpoints:



1) % average weight loss: Contrave32 patients had an average weight loss of 9.3%,

compared with 5.1% in the placebo group, for a placebo-adjusted average weight loss of 4.2%.

This result was statistically significant (p<0.001). However, it did not meet FDA’s efficacy

benchmark of a 5% difference in average weight loss between therapy and placebo.

2) % of patients losing at least 5% of their weight: 66.4% of the patients in the Contrave32

group lost at least 5% of baseline body weight, compared to 42.5% in the in the placebo group.

This result on the one hand seems to satisfy the 35% FDA guidance benchmark; on the other

hand, the agency could, at least theoretically, question whether the trial satisfied the efficacy

requirement, since the proportion of subjects on treatment achieving at least 5% weight loss

was approximately 1.5 times that of the number of subjects on placebo, versus the FDA

guidance for ―approximately double.”

COR-BMOD: Efficacy Data

Key Endpoints Contrave32 Placebo Difference p-value

n (mITT-LOCF) n=482 n=193 - -

Mean Weight Loss (%) (mITT-LOCF) 9.3% 5.1% 4.2% p<0.001

≥5% weight loss (mITT-LOCF) 66.4% 42.5% 23.9% p<0.001


n (Completers) n=301 n=106 - -





COR-BMOD (NB-302) (n=793)


Secondary Endpoints: Contrave treatment improved other secondary anthropometric and

cardiometabolic measures: Waist circumference was reduced by 10.0 cm vs. 6.8 cm for

placebo, HDL increased by 4.1mg/dL, and triglycerides reduced by 22.2 mg/dL (16.6%). By

comparison, patients in the placebo arm increased HDL by 0.9mg/dL and reduced triglycerides

by 11.3mg/dL (8.5%).

Blood pressure and heart rate: At week 56, systolic blood pressure (SBP) was reduced by

3.9 mm Hg on average in placebo patients, compared with a decrease of 1.3 mm Hg in

patients treated with Contrave (p=0.002). Diastolic blood pressure (DBP) was also reduced to

different degrees in placebo and Contrave patients, by 2.8 mm Hg and 1.4 mm Hg,

respectively (p=0.017). At 56 weeks, there were no significant differences in heart rate

between groups (+0.2 bpm for placebo vs. +1.1 bpm for Contrave); however, placebo-adjusted

heart rate increases as large as +3.4 bpm were noted in the first 20 weeks of treatment with

Contrave.



COR-BMOD: Secondary Endpoints

Contrave32 Placebo p-value

Change in blood fasting glucose -1.5% 0.0% 0.185

Change in insulin -28.0% -15.5% 0.003

Change in HOMA-IR -29.9% -16.6% 0.003


Change in hs-CRP -25.9% -16.9% 0.165


Change in waist circumference -10 cm -6.8cm <0.001

Change in Systolic blood pressure -1.3 mm Hg -3.9 mm Hg 0.002

Change in Diastolic blood pressure -1.4 mm Hg -2.8 mm Hg 0.017

Change in Heart rate (beats per minute) +1.1 +0.2 0.139


Safety & Tolerability: Nausea, mostly mild to moderate in intensity, was the most common AE

and more frequently associated with Contrave treatment. Other common AEs included

constipation, dizziness, dry mouth, tremor, upper abdominal pain, and tinnitus. There were no

differences between groups in the most common psychiatric AEs, such as anxiety, sleep

disorder, depressed mood, and insomnia. Depression was more frequent in placebo patients.



COR-BMOD: Safety Data

Contrave32

(n=584)

n(%)

Placebo

(n=200)

n(%)

Nausea 199 (34.1) 21 (10.5)

Headache 139 (23.8) 35 (17.5)

Constipation 141 (24.1) 28 (14.0)

Dizziness 85 (14.6) 9 (4.5)

Vomiting 64 (11.0) 13 (6.5)

Insomnia 51 (8.7) 12 (6.0)

Dry mouth 47 (8.0) 6 (3.0)

Anxiety 30 (5.1) 7 (3.5)

Tremor 34 (5.8) 2 (1.0)

Abdominal pain, upper 32 (5.5) 3 (1.5)

Tinnitus 31 (5.3) 1 (0.5)

Insomnia 51 (8.7) 12 (6.0)

Anxiety 30 (5.1) 7 (3.5)

Sleep disorder 14 (2.4) 6 (3.0)

Depressed mood 11 (1.9) 8 (4.0)

Abnormal dreams 8 (1.4) 4 (2.0)

Middle insomnia 6 (1.0) 2 (1.0)

Tension 7 (1.2) 1 (0.5)

Depression 2 (0.3) 5 (2.5)

Stress 3 (0.5) 4 (2.0)

Dissociation 6 (1.0) 0 (0)

Nausea 27 (4.6) 0 (0)

Urticaria 10 (1.7) 1 (0.5)

Anxiety 7 (1.2) 3 (1.5)

Disturbance in attention 6 (1.0) 0 (0)

Headache 5 (0.9) 1 (0.5)

Blood pressure increased 4 (0.7) 0 (0)

Dizziness 4 (0.7) 0 (0)

Vomiting 4 (0.7) 0 (0)

Depressed mood 3 (0.5) 1 (0.5)

Feeling abnormal 3 (0.5) 1 (0.5)

Abdominal pain 3 (0.5) 0 (0)

Abdominal pain upper 3 (0.5) 0 (0)

Disorientation 3 (0.5) 0 (0)

Dissociation 3 (0.5) 0 (0)

Feeling jittery 3 (0.5) 0 (0)

Insomnia 3 (0.5) 0 (0)

Rash 3 (0.5) 0 (0)

Psychiatric AEs

AEs resulting in discontinuation




Contrave’s Final Three Phase III Trials Meet the Mark

In July 2009, Orexigen announced that Contrave’s three remaining Phase III trials met their co-

primary endpoints, with 48.0%, 50.5%, and 44.5% of patients on Contrave losing ≥ 5% of body

weight after 56 weeks in the NB-301, NB-303, and NB-304 trials, respectively, compared to

16.4%, 17.1%, and 18.9% of placebo patients (p<0.001 for all). These data exceeded the FDA

primary efficacy benchmark for categorical weight loss.

COR-I (NB-301) Trial

This trial was the largest of the four trials in the Phase III Contrave Obesity Research (COR)

program. COR-I was a 56-week trial which evaluated two doses of Contrave in overweight and

obese patients. Patients were randomized 1:1:1 to receive daily 32 mg SR naltrexone + 360

mg SR bupropion (Contrave32), 16 mg SR naltrexone + 360 mg SR bupropion (Contrave16),

or placebo. The study included a 3-week dose escalation, starting with one-quarter of the full

dose, which was increased weekly until the full dose was reached by week 4. Eligibility criteria

in the trial included: age 18-65 years, and BMI 30-45 kg/m2 or 27-45 kg/m2 with controlled

hypertension and/or dyslipidemia. Participants were instructed on diet and provided advice on

lifestyle modification, including exercise instruction, at baseline and weeks 12, 24, 36, and 48.

The trial met both its co-primary endpoints:

1) % average weight loss: Contrave patients had an average weight loss of 6.1% in the

Contrave32 group, 5.0% in the Contrave16 group, and 1.3% in the placebo group, for placebo-

adjusted average weight losses of 4.8% and 3.7% in the Contrave32 group and Contrave16

groups, respectively. These results were statistically significant. However, they did not meet

FDA’s efficacy benchmark of a 5% difference in average weight loss between therapy and

placebo.

2) % of patients losing at least 5% of their weight: 48% of the patients in the Contrave32

group lost at least 5% of baseline body weight, compared to 39% in the Contrave16 group and

16% in the placebo group. With these data, Contrave met the threshold specified in FDA's draft

guidance for efficacy of obesity drugs.



COR-I: Primary efficacy endpoints

Key Endpoints Contrave16 Contrave32 PlaceboDifference

(Contrave16)p-value

Difference

(Contrave32)p=value

n (mITT-LOCF) n=471 n=471 n=511 - - - -

Mean Weight Loss (%) (mITT-LOCF) 5.0% 6.1% 1.3% 3.7% p<0.0001 4.8% p=0.0079

≥5% weight loss (mITT-LOCF) 39.5% 48.0% 16.4% 23.1% p<0.0001 31.6% p=0.0099

≥10% weight loss (mITT-LOCF) 20.2% 24.6% 7.4% 12.8% p<0.0001 17.2% p<0.0001

n (Completers) n=284 n=296 n=290 - - - -

Mean Weight Loss (%) (Completers) 6.7% 8.1% 1.8% 4.9% p<0.0001 6.3% p<0.0001

≥5% weight loss (Completers) 54.6% 61.8% 23.1% 31.5% p<0.0001 38.7% p<0.0001

≥10% weight loss (Completers) 29.9% 34.5% 10.7% 19.2% p<0.0001 23.8% p<0.0001

Completion rate 60% 63% 57% - - - -

COR-I (NB-301) (n=1,742)


Secondary Endpoints: The Contrave treatment groups also had significant improvements in a

number of secondary anthropometric and cardiometabolic parameters compared with the

placebo group, including (Contrave32/Contrave16/placebo, p value for Contrave 32 vs.

placebo): waist circumference (-6.2 cm vs. -5.0 cm vs. -2.5 cm, p<0.0001); triglycerides (-

12.7% vs. -8% vs. -3.1%, p<0.0001); hs-CRP (-29% vs. -28% vs. -16.7%, p=0.0076); fasting

insulin (-17.1% vs. -11.8% vs. -4.6%, p=0.0007). Patients in the Contrave groups also had

improved quality of life scores, as measured by the IWQOL-LITE scale (12.7 vs. 11.7 vs. 8.6,

p<0.0001).

Blood pressure and heart rate: Mean blood pressure decreased from baseline to 56 weeks

in placebo patients. However, both systolic and diastolic blood pressures were unchanged or

slightly changed in the Contrave groups. SBP decreased by 0.1 mm Hg and increased by 0.3

mm Hg in the Contrave32 and Contrave16 groups, respectively, compared with a reduction of

1.9 mm Hg in the placebo group. DBP did not change from baseline in the Contrave32 group

and increased by 0.1 mm Hg in the Contrave16 group, while placebo patients had a decrease

of 0.9 mm Hg.

Mean systolic and diastolic blood pressures were noted to increase by approximately 1.5 mm

Hg from baseline in the first 8 weeks of Contrave treatment, followed by return to baseline

levels after week 12, with subsequent 1 mm Hg decrease for the remaining time in the study.

These blood pressure changes were less than those experienced by the placebo group, in

which there was a decrease in systolic and diastolic blood pressures of approximately 1.5 mm

Hg from baseline during the first 12 weeks and subsequently continued reductions between 1.5

and 3 mm Hg. Heart rates increased up to 1.5 beats per minute from baseline in Contrave

patients, while placebo patients maintained baseline heart rates.



COR-I: Key Secondary Endpoints

Contrave16 Contrave32 Placebo p-value

Contrave16

p-value

Contrave32

Change in blood fasting glucose -1.9% -2.6% -0.7% 0.1584 0.0104

Change in insulin -11.8% -17.1% -4.6% 0.0628 0.0007

Change in HOMA-IR -14.3% -20.2% -5.9% 0.0442 0.0003

Change in triglycerides -8.0% -12.7% -3.1% 0.0461 <0.0001

Change in hs-CRP -28.0% -29.0% -16.7% 0.0159 0.0076

Change in IWQOL-LITE 11.7 12.7 8.6 <0.0001 <0.0001

Change in waist circumference -5.0 cm -6.2 cm -2.5 cm <0.0001 <0.0001

Change in Systolic blood pressure 0.3 mm Hg -0.1 mm Hg -1.9 mm Hg <0.0001 0.0008

Change in Diastolic blood pressure 0.1 mm Hg 0.0 mm Hg -0.9 mm Hg 0.0150 0.0217

Change in Heart rate (beats per minute) +1.5 +1.0 -0.1 <0.05 <0.05 Source: Cowen and Company, Orexigen Therapeutics

Safety and Tolerability: The most common adverse event in the Contrave groups was

nausea. There was no increase in treatment-emergent psychiatric adverse events, such as

depression, suicidality, or other mood-related issues. The rate of serious adverse events did

not differ significantly between groups (1.6% for both Contrave groups and 1.4% for placebo).

There were no seizures or serious hypertension events. There were two serious cardiovascular

adverse events in the Contrave groups, one cardiac failure and one death resulting from MI,

but investigators did not consider these events to be treatment-related.

COR-I: Safety Data

Contrave16

(n=569)

n(%)

Contrave32

(n=573)

n(%)

Placebo

(n=569)

n(%)

Serious adverse events 1.60% 1.60% 1.40%

Participants reporting any adverse event 455 (80·0%) 476 (83·1%) 390 (68·5%)

Nausea 155 (27·2%) 171 (29·8%) 30 (5·3%)

Headache 91 (16·0%) 79 (13·8%) 53 (9·3%)

Constipation 90 (15·8%) 90 (15·7%) 32 (5·6%)

Upper respiratory tract infection 49 (8·6%) 57 (9·9%) 64 (11·2%)

Dizziness 44 (7·7%) 54 (9·4%) 15 (2·6%)

Insomnia 36 (6·3%) 43 (7·5%) 29 (5·1%)

Vomiting 36 (6·3%) 56 (9·8%) 14 (2·5%)

Sinusitis 34 (6·0%) 30 (5·2%) 34 (6·0%)

Dry mouth 42 (7·4%) 43 (7·5%) 11 (1·9%)

Nasopharyngitis 32 (5·6%) 29 (5·1%) 31 (5·4%)

Diarrhoea 31 (5·4%) 26 (4·5%) 28 (4·9%)

Hot fl ush 13 (2·3%) 30 (5·2%) 7 (1·2%)

Participants reporting any psychiatric adverse event 76 (13·4%) 85 (14·8%) 62 (10·9%)

Insomnia 36 (6·3%) 43 (7·5%) 29 (5·1%)

Anxiety 12 (2·1%) 9 (1·6%) 12 (2·1%)

Depression 9 (1·6%) 3 (0·5%) 6 (1·1%)


COR-II (NB-303) Trial

This was a 56-week study in obese and overweight patients with co-morbidities. Patients were

randomized 2:1 to daily 32 mg SR naltrexone + 360 mg SR bupropion (Contrave32) or



placebo. The Contrave dose was escalated weekly over the first 3-4 weeks, with full dose

reached by the beginning of week 5. To evaluate efficacy and safety of a dose increase in

patients with sub-optimal response, Contrave32 patients with < 5% weight loss between weeks

28 and 44 were randomized again double-blind, 1:1 to continue on Contrave32 or escalate to

48 mg SR naltrexone + 360 mg SR bupropion (Contrave48). The two co-primary endpoints of

the study were mean weight loss at week 28, and proportion of patients with ≥ 5% weight loss

at week 28. Eligibility criteria in the trial included: age 18-65 years, and BMI 30-45 kg/m2 or 27-

45 kg/m2 with controlled hypertension and/or dyslipidemia. Participants were instructed on diet

and provided advice on lifestyle/behavioral modification, including exercise instruction, at

baseline and weeks 12, 24, 36, and 48.


1) % average weight loss at week 28: At week 28, Contrave32 patients had an average

weight loss of 6.5%, compared with 1.9% in the placebo group. This significant difference was

maintained at 56 weeks, with Contrave patients losing 6.4% of body weight and placebo

patients losing 1.2%, for a placebo-adjusted average weight loss of 5.2%. These results were

statistically significant. The 56-week result did meet FDA’s efficacy benchmark of a 5%


2) % of patients losing at least 5% of their weight: At week 28, 55.6% of the patients in the

Contrave32 group lost at least 5% of baseline body weight, compared to 17.5% in the placebo

group. This significant difference was also maintained at 56 weeks, with 50.5% of Contrave

patients losing ≥ 5% of body weight, compared with 17.1% of placebo patients. With these

data, Contrave met the categorical weight loss threshold specified in FDA's draft guidance for

efficacy of obesity drugs.

COR-II: Efficacy Data

Key Endpoints Contrave32 Placebo Difference p-value Contrave32 Placebo Difference p-value

n (mITT-LOCF) n=825 n=456 - - n=702 n=456 - -

Mean Weight Loss (%) (mITT-LOCF) 6.5% 1.9% 4.6% p<0.001 6.4% 1.2% 5.2% p<0.001

≥5% weight loss (mITT-LOCF) 55.6% 17.5% 38.1% p<0.001 50.5% 17.1% 33.4% p<0.001

≥10% weight loss (mITT-LOCF) 27.3% 7.0% 20.3% p<0.001 28.3% 5.7% 22.6% p<0.001

n (Completers) n=619 n=319 - - n=434 n=267 - -

Mean Weight Loss (%) (Completers) 7.8% 2.4% 5.4% p<0.001 8.2% 1.4% 6.8% p<0.001

≥5% weight loss (Completers) 68.8% 22.3% 46.5% p<0.001 64.9% 21.7% 43.2% p<0.001

≥10% weight loss (Completers) 35.7% 9.4% 26.3% p<0.001 39.4% 7.9% 31.5% p<0.001

Completion rate 75% 70% - - 62% 59% - -

COR-II (NB-303) (n=1,496)

28 weeks (timepoint for primary endpoint analysis) 56 weeks


Secondary Endpoints: As in the other trials in the COR program, Contrave treatment also

resulted in improvements of a number of secondary anthropometric and cardiometabolic

parameters, such as waist circumference, triglycerides, fasting insulin, and HOMA-IR. There



was similarly also improvement in quality of life with Contrave treatment versus placebo, as

measured by the IWQOL-Lite score, including physical function self-esteem, and sexual life.

Blood pressure and heart rate: At week 56, mean SBP was elevated by 0.6 mm Hg in the

Contrave group, but decreased by 0.5 mm Hg in the placebo group. Mean DBP was elevated

in both groups, by 0.4 mm Hg and 0.3 mm Hg, respectively. Heart rate remained unchanged

with placebo, and a +1 bpm increased rate was noted in the Contrave group.

COR-II: Key Secondary Endpoints

Contrave32 Placebo p-value Contrave32 Placebo p-value

Change in blood fasting glucose -2.1 mg/dL -1.7 mg/dL 0.0544 -2.8 mg/dL -1.3 mg/dL 0.051

Change in insulin -14.1% -0.5% <0.001 -11.4% 3.5% <0.001

Change in HOMA-IR -16.4% -4.2% <0.001 -13.8% 1.2% <0.001

Change in triglycerides -7.3% -1.4% 0.007 -9.8% -0.5% <0.001

Change in hs-CRP -9.4% -1.1% 0.091 -28.8% -8.3% <0.001

Change in IWQOL-LITE 9.9 6.2 <0.001 10.9 6.4 <0.001

Change in waist circumference -6.2 cm -2.7 cm <0.001 -6.7 cm -2.1 cm <0.001

Change in Systolic blood pressure -0.9 (mm Hg) -1.2 (mm Hg) 0.556 +0.6 (mm Hg) -0.5 (mm Hg) 0.039

Change in Diastolic blood pressure +0.2 (mm Hg) -0.7 (mm Hg) 0.017 +0.4 (mm Hg) +0.3 (mm Hg) 0.847

Change in Heart rate (beats per minute) - - - +0.8 -0.3 <0.05

28 weeks 56 weeks


Safety and tolerability: Consistent with the other COR trials, the most common treatment-

emergent AEs were nausea, headache, and constipation, which were usually mild to moderate

in intensity. There were no differences between the Contrave and placebo groups in

psychiatric measures, such as sadness, irritability, tension, and suicidality. Contrave was not

associated with increased depression or other mood-related AEs. Serious AE rates were

similar between the Contrave (2.1%) and placebo (1.4%) groups. In the Contrave group, there

was one MI in a patient with CV history and one seizure.



COR-II: Safety Data

Contrave32

n=992

Placebo

n=492

Participants (%) reporting any adverse event 85.9% 75.2%

Nausea 29.2% 6.9%

Constipation 19.1% 7.1%

Headache 17.5% 8.7%

Insomnia 9.8% 6.7%

Dry mouth 9.1% 2.6%

Upper respiratory 8.7% 11.2%

Vomiting 8.5% 2.0%

Nasopharyngitis 8.3% 8.1%

Dizziness 6.9% 3.7%

Diarrhea 5.5% 3.7%

Sinusitis 5.1% 7.1%

Arthralgia 3.8% 5.7%

Bronchitis 1.4% 5.1%

Participants (%) reporting any psychiatric AEs 20.7% 15.2%

Insomnia 9.8% 6.7%

Anxiety 4.8% 4.3%

Depression 1.3% 1.6%

Sleep disorder 1.1% 0.8%

Participants (%) reporting any adverse event leading to discontinuation 24.3% 13.8%

Nausea 6.0% 0.2%

Headache 2.6% 0.8%

Depression 0.5% 1.2%

Cardiovascular endpoints

Systolic blood pressure, change from baseline (mm Hg) +0.20 -0.40

Diastolic blood pressure, change from baseline (mm Hg) +00 +0.10

Heart rate, change from baseline to Week 56 (bpm) +0.8 -0.30 Source: Cowen and Company, Orexigen Therapeutics

COR-Diabetes (NB-304) Trial

This was a 56-week trial in obese and overweight patients with type 2 diabetes. Patients were

randomized 2:1 to daily 32 mg SR naltrexone + 360 mg SR bupropion (Contrave32) or

placebo. Eligibility criteria in the trial included: age 18-70 years, and BMI 27-45 kg/m2 with type

2 diabetes mellitus, on no injectable or inhaled insulin for more than 3 months, and with HbA1c

levels between 7%-10%. Patients were permitted to be on oral single or combination diabetes

medications, stable for at least 3 months before randomization, or on no medications.

Participants were instructed on diet and provided advice on lifestyle/behavioral modification,

including exercise instruction, at baseline and weeks 12, 24, 36, and 48.


1) % average weight loss: At week 56, Contrave patients had an average weight loss of 5%,

compared with 1.8% in the placebo group, for a placebo-adjusted average weight loss of 3.2%.

While statistically significant, this result did not meet FDA’s efficacy benchmark of a 5%


2) % of patients losing at least 5% of their weight: 44.5% of the patients in the Contrave32

group lost at least 5% of baseline body weight, compared to 18.9% in the placebo group. With



these data, Contrave met the categorical weight loss threshold specified in FDA's draft

guidance for efficacy of obesity drugs.

COR-Diabetes: Efficacy Data

Key Endpoints Contrave32 Placebo Difference p-value

n (mITT-LOCF) n=265 n=159 - -

Mean Weight Loss (%) (mITT-LOCF) 5.0% 1.8% 3.2% p<0.001



n (Completers) n=175 n=100 - -





COR-Diabetes (NB-304) (n=505)


Secondary Endpoints: Anthropometric and cardiometabolic parameters were generally

improved with Contrave, similar to the other COR trials. In this diabetic population, glycemic

control was improved with Contrave treatment. Contrave patients with baseline HbA1c > 8%

showed a reduction of 1.1%, compared with 0.5% reduction in placebo patients (p<0.01). More

than 44% of Contrave patients reached the American Diabetes Association treatment target of

HbA1c level < 7%, compared with 26% of placebo patients (p<0.001).

COR-Diabetes: Key Secondary Endpoints

Contrave32 Placebo p-value

Change in HbA1c -0.6% -0.1% <0.001

Proportion of subjects with HbA1c <7% 44.1% 26.3% <0.001


Change in hs-CRP -20.9% -13.3% 0.312

Change in IWQOL-LITE 9.3 7.9 0.208

Change in waist circumference -5 cm -2.9 cm <0.006


Safety and tolerability: Consistent with the other COR trials, the most common treatment-

emergent AEs included nausea and constipation. The overall safety profile was consistent with

that demonstrated in other COR trials. The incidence of hypoglycemia was similar between the

groups.



COR-Diabetes: Safety Data

Contrave 32

n=333

Placebo

n=169

Participants (%) reporting any AEs 90.4% 85.2%

Nausea 42.3% 7.1%

Vomiting 18.3% 3.6%

Constipation 17.7% 7.1%

Diarrhea 15.6% 9.5%

Headache 13.8% 8.9%

Dizziness 11.7% 5.3%

Insomnia 11.1% 5.3%

Hypertension 9.9% 4.1%

Hypoglycemia 7.5% 7.1%

Tremor 6.6% 2.4%

Dry mouth 6.0% 3.0%

Anxiety 5.4% 1.2%

Upper respiratory 5.1% 1.8% Source: Cowen and Company, Orexigen Therapeutics

Responders Maintained Meaningful Weight Loss

Approximately 51% and 67% of the patients in the COR program and COR-BMOD trial,

respectively, met the definition of responder by achieving >5% weight loss at week 16.

Responders achieved meaningful weight losses of 11.3% and 13.4%, respectively, after one

year of treatment. In the COR program, 19% of placebo patients met the definition of

responder, and these patients had an average loss of 8.6% at one year.

COR Program responders

COR Program

(n=1,038)

Placebo Responder

(n=254)

% Meeting responder definition 51.0% 19.0%

% Weight loss at 1 year 11.3% 8.6%

>5% weight loss at 16 weeks

Source: Cowen and Company, Orexigen

Similarly, approximately 62% and 73% of the patients in the COR program and COR-BMOD

trial, respectively, met the responder definition of achieving >3% weight loss at week 12. This

patient population achieved meaningful weight loss of 10.3% and 12.7%, respectively, in the

trials after one year of treatment.

We believe that only responders will continue treatment with Contrave after 16 weeks. The

representative weight loss in the Contrave responder patient population is similar to that

achieved by treatment with either Qsymia or BELVIQ.



COR-I, COR-II, COR-Diabetes And COR-BMOD: Responder Analysis

COR Program

(n=1,038)

COR BMOD

(n=322)



COR Program

(n=1,268)

COR BMOD

(n=352)






We View Contrave’s Tolerability in the COR Phase III Program as Acceptable

The discontinuation rates due to adverse events across the Phase III COR program ranged

from 19% to 29% for patients treated with Contrave, compared with 10% to 15% for patients

treated with placebo. In the double-blind treatment phase, the discontinuation rates related to

adverse events were 23.8% for the Contrave arm vs. 11.9% for the placebo arm. The most

common adverse events leading to treatment discontinuation were nausea (6.3% Contrave vs.

0.2% placebo), headache (1.7% Contrave vs. 0.6% placebo), dizziness (0.9% Contrave vs.

0.3% placebo), and vomiting (1.1% Contrave vs. < 0.1% placebo).

Our consultants were satisfied with these data. They described the dropout rate as “fair” and in

line with that seen in many obesity trials. They consider the major adverse events – nausea,

dizziness, and vomiting – to be tolerability issues and not safety problems, of which the rates

and severity are acceptable. In fact, our consultants feel it would be possible that the rates

could decrease if patients up-titrated their Contrave dose over time. Therefore, they are

optimistic that Contrave would become more tolerable as patients and physicians better learn

how to use it.



Safety and Tolerability Data From Contrave's Four Phase III COR Trials

Treatment-Emergent Adverse EventsPlacebo

(N=1,515)

Contrave

(naltrexone 16mg)

(N=633)

Contrave

(naltrexone 32mg)

(N=2,545)

Contrave

(combined 16/32

data)

(N=3,239)

p-value

Discontinue treatment due to any AE 181 (11.9%) 139 (22.0%) 612 (24.0%) 771 (23.8%) <0.001

Nausea 3 (0.2%) 32 (5.1%) 160 (6.3%) 203 (6.3%) <0.001

Headache 9 (0.6%) 10 (1.6%) 43 (1.7%) 55 (1.7%) 0.002

Dizziness 5 (0.3%) 15 (2.4%) 23 (0.9%) 42 (1.3%) 0.001

Vomiting 1 (<0.1%) 4 (0.6%) 28 (1.1%) 35 (1.1%) <0.001

Insomnia 7 (0.5%) 5 (0.8%) 17 (0.7%) 23 (0.7%) 0.290

Anxiety 10 (0.7%) 1 (0.2%) 19 (0.7%) 21 (0.6%) 0.843

Urticaria 4 (0.3%) 3 (0.5%) 16 (0.6%) 19 (0.6%) 0.198

Depression 13 (0.9%) 6 (0.9%) 10 (0.4%) 16 (0.5%) 0.144

Blood pressure increased 3 (0.2%) 3 (0.5%) 10 (0.4%) 13 (0.4%) 0.276

Rash 2 (0.1%) 1 (0.2%) 12 (0.5%) 13 (0.4%) 0.125

Hypertension 0 3 (0.5%) 7 (0.3%) 11 (0.3%) 0.021

Fatigue 3 (0.2%) 3 (0.5%) 7 (0.3%) 10 (0.3%) 0.518

Palpitations 0 5 (0.8%) 4 (0.2%) 10 (0.3%) 0.031

Abdominal pain 1 (<0.1%) 5 (0.8%) 4 (0.2%) 9 (0.3%) 0.157

Tremor 1 (<0.1%) 3 (0.5%) 6 (0.2%) 9 (0.3%) 0.141 Source: Cowen and Company, Orexigen

Summary of Contrave’s Regulatory History

The AdCom gives Contrave a surprise 13-7 positive nod…

The EMDAC (Endocrinologic and Metabolic Drugs Advisory Committee) of the FDA met to

consider the Contrave NDA on December 7, 2010. Given that the AdCom had previously voted

against the approvals of both BELVIQ and Qsymia, there was low investor expectation for a

positive vote. Thus, the 13-7 vote in favor of Contrave approval for treatment of obesity came

as a surprise. While panel members viewed Contrave’s efficacy as modest, they considered it

to meet FDA requirements for weight loss efficacy. In view of the modest benefit, a key issue

was Contrave’s safety, with CV safety being the greatest concern to advisory panel members.

In the COR Phase III program, overall mean elevations in BP and HR were associated with

Contrave treatment relative to placebo. Both the FDA and Orexigen agreed that a

cardiovascular outcomes trial (CVOT) would be required. However, the key question revolved

around the timing requirement of the study, specifically before or after potential approval.

There was debate between panel members considering the CV risk as low and definable in a

quickly conducted trial and those worried about the potential need to withdraw another obesity

drug from the market after approval, with resulting loss of FDA credibility. The panel ultimately

voted 11-8 for CVOT completion post-approval.



Contrave’s CV Safety Data

C o n tr a v e ( n a ltr e x o n e 1 6 m g )

( n = 2 7 6 )

C o n tr a v e

( n a ltr e x o n e 3 2 m g )

( n = 1 ,3 1 2 )

C o n tr a v e ( co m b in e d

1 6 /3 2 d a ta ) ( n = 1 ,5 8 8 )

P la ce b o

( n = 7 5 1 )

S y s to l ic b lo o d p re s s u re , m m H g

M e a n c h a n g e -0 .2 4 -0 .9 4 -0 .8 2 -2 .3 3

D i ffe re n c e fro m p la c e b o (m m H g ) + 2 .0 9 + 1 .3 9 + 1 .5 4

D ia s to l ic b lo o d p re s s u re , m m H g

M e a n c h a n g e -0 .3 7 -1 .1 4 -1 .0 1 -1 .5

D i ffe re n c e fro m p la c e b o (m m H g ) + 1 .1 3 + 0 .3 6 + 0 .5 1

H e a rt ra te , b p m

M e a n c h a n g e + 1 .3 + 0 .1 + 0 .3 -0 .9 8

D i ffe re n c e fro m p la c e b o (b p m ) + 2 .2 8 + 1 .0 7 + 1 .3 5


…but FDA goes 3-for-3 in rejecting these new obesity drugs

Despite the positive opinion from the AdCom, in February 2011, Orexigen announced that it

had received a Complete Response Letter (CRL) from the FDA, noting "concern about the

cardiovascular safety profile of naltrexone/bupropion when used long term in a population of

overweight and obese subjects." The CRL requested the completion of a pre-approval CV

safety study by Orexigen and specifically stated, "before your application can be approved, you

must conduct a randomized, double-blind placebo-controlled trial of sufficient size and duration

to demonstrate that the risk of major adverse cardiovascular events in overweight and obese

subjects treated with naltrexone/bupropion does not adversely affect the drug's adverse event

profile."

In May 2011, Orexigen met with FDA’s Division of Metabolic and Endocrinologic Products

(DMEP) to gain more clarity on the CRL. Orexigen proposed Contrave approval with a narrow

indication, in patients with lower cardiovascular risk, until data from a proposed CVOT could be

reviewed for label expansion. The DMEP rejected this request and advised Orexigen that its

proposed CVOT would not adequately address cardiovascular issues. The DMEP further

stated that it would not consider approval of Contrave for a narrow indication without first

reviewing CVOT data. Based on this feedback, Orexigen decided to put further clinical

development of Contrave on hold in the United States.

After a dispute resolution process with the FDA, Orexigen announced in September 2011 that

an agreement had been reached on the design requirement for the CVOT, addressing

concerns specified in the CRL. According to the company, the FDA stated that ―if the interim

analysis meets the specified criteria to exclude an unacceptable increased cardiovascular (CV)

risk, the drug could be approved.‖ This signaled a reversal from the previous FDA stance that

CV risk be ruled out, which would have required a much larger trial. In agreeing with the terms,

Orexigen considered the design requirements to be “reasonable and feasible.”



Contrave’s CVOT: LIGHT Study

The LIGHT Study is the randomized, double-blind, placebo-controlled cardiovascular outcomes

trial (CVOT) for Contrave. The trial is being conducted under a Special Protocol Assessment

(SPA) with the FDA. FDA requirements for the trial design include powering based on an

intent-to-treat (ITT) analysis. The trial must enroll an overweight and obese population which

has an estimated annual risk of 1% to 1.5% for major adverse cardiovascular events (MACE),

defined as: 1) cardiovascular death, 2) non-fatal myocardial infarction, and 3) non-fatal stroke.

LIGHT Study Statistical Criteria: Specific statistical criteria have been issued for the interim

and final analyses of CV risk in this population:

The upper bound of the 95% confidence interval (CI) should exclude a hazard ratio (HR)

of 2.0 at the interim analysis, and of 1.4 at the final analysis. With this design, there is an

estimate of at least 87 total required MACE events at the interim analysis, and of at least 371

MACE events at the final analysis. The company has previously indicated that, at interim

analysis, in order to exclude a HR of 2.0 from the confidence interval, the observed HR in the

trial must be <1.32, and at final analysis, the observed HR must be <1.14.

LIGHT Study Design: Patients are randomized 1:1 to treatment with Contrave, administered

in conjunction with a comprehensive weight management program, or to placebo administered

with the same program. The dose of Contrave is escalated weekly over 4 weeks up to the full

dose.

Lead-in Period: There is a two-week lead-in period after screening and prior to the treatment

period. For the lead-in, patients are randomized 1:1 to receive either placebo during the first

week and the lowest daily dose of Contrave (8 mg naltrexone/90 mg bupropion) during the

second week, or the lowest Contrave dose during the first week and placebo during the second

week. Patients will be trained on using food diaries, which they are expected to consistently

complete during this time.

Orexigen has guided that the purpose of the lead-in period is two-fold: 1) to provide subjects

with a small dose of Contrave, in order to stimulate nausea and allow patients unable to

tolerate this known side-effect of naltrexone to drop out, and 2) to evaluate subjects’

commitment to a clinical trial by assessing compliance with food diaries. The company has

noted its intention to avoid discontinuations resulting from nausea during LIGHT’s treatment

period, which occurred with a 15-20% incidence and a usual duration of ~2 weeks, in the

Phase III Contrave trial program. Subjects who discontinue during the lead-in period will

not be counted as part of the ITT population.

Evaluation to Continue Treatment: Patients will be evaluated at Week 16 to determine

continuation in the study. Patients who 1) have not lost 2% of body weight by week 16 and/or

2) experience a sustained increase in either systolic or diastolic BP, defined as multiple

observations of at least 10 mm Hg increases in BP on two successive readings, any time



during the 16-week period will discontinue treatment. However, as part of the ITT

population, their MACE events, if any, will be included in the final study analysis.

LIGHT Study Design

Source: Orexigen Presentation

Orexigen expects that, after Week 16, approximately 50% of patients in both trial arms will

have discontinued study treatment, either resulting from standard drop-outs or from meeting

criteria for discontinuation at 16 weeks. These patients will be counted in the ITT population.

Primary Endpoint: The primary endpoint of the trial is time from treatment period

randomization to the first confirmed occurrence of MACE events. The time frame extends from

Day 1 to first confirmed occurrence, assessed up to 4 years.

LIGHT Study Population: Inclusion and exclusion criteria for the trial reflect the target

background annual 1%-1.5% CV event risk. Using U.S. population-based data sets, for

example NHANES, Orexigen targeted enrollment of a patient population with a modeled

background annual MACE rate of > 2%, expecting to observe a MACE rate of about 1.5%. The

trial population included females ≥ 50 years old and males ≥ 45 years old, with BMI range 27-

50 kg/m2. Subjects were required to have 1) cardiovascular disease; or 2) diabetes mellitus,

with at least two of four additional risk factors; or 3) both:

CV disease was identified by at least one of the following: history of MI >3 months

prior to screening, history of coronary/carotid/peripheral revascularization

procedures, angina with ischemia, evidence of peripheral vascular disease, or ≥ 50%

arterial stenosis (coronary/carotid/lower extremity vessel) within prior 2 years.

Otherwise, instead of, or in addition to, CV disease, patients had type 2 diabetes

mellitus accompanied by at least two of the following conditions: controlled

hypertension with BP<145/95mmHg, dyslipidemia requiring pharmacotherapy, low

HDL cholesterol (< 50 mg/dL in women or < 40 mg/dL in men), or current smoking

history.



Particularly high-risk individuals, such as those with MI within 3 months, unstable angina,

stroke history, tachyarrhythmia history, planned bariatric surgery/cardiac surgery/coronary

angioplasty, or life expectancy < 4 years, were excluded.

The following table illustrates the characteristics of 8,911 patients enrolled in LIGHT.

Patient Characteristics in LIGHT Study

Characteristics TargetRandomized subjects

(n=8,911)

Age 64 61

Younger age group <25% 14%

Gender 50:50 (M:F) 45:55 (M:F)

Minority 15% 22%

CV disease 30% 34%

Diabetes >70% 85%

Smoking status >5% 9% Source: Cowen and Company, Orexigen Presentation August 2013

LIGHT Study Enrollment: The trial began enrolling patients on June 6, 2012. On September

5, 2012, Orexigen announced that the LIGHT study was enrolling patients more quickly than

anticipated, with > 4,500 patients enrolled as of August 31, 2012. On December 18, 2012, the

company announced the completion of screening and enrollment, accomplished within 6.5

months of initiation, indicating that 13,192 patients had been screened for the study, of which

approximately 10,400 patients met eligibility criteria, were enrolled, and entered the lead-in

period. Ultimately 8,911 patients were then randomized to the treatment period. The company

has stated that the final population in the trial is sufficient for and reflective of the targeted 1-

1.5% annual MACE rate.

LIGHT Trial Enrollment Faster Than Expected

Source: Orexigen Presentation



Faster Path to Resubmission of the Contrave NDA

On January 7, 2013, Orexigen announced further progress with regard to the potential

resubmission of the Contrave NDA. The FDA will allow Orexigen to resubmit the NDA based

on the Data Monitoring Committee (DMC) summary report of the LIGHT interim analysis, and

to submit the complete clinical study report within 60 days. Interim analysis from the study is

expected by early December 2013, with plan for NDA resubmission by YE13.

2Q13 Earnings Call Update: On August 6, 2013, Orexigen management reiterated guidance

that the LIGHT trial interim analysis and resubmission of the Contrave NDA (Class 2

resubmission, with a 6-month review process expected) were expected in 2H13. According to

management, the LIGHT trial timeline was “on track,” and the 87th MACE event was expected

within the “next few months.” More information on this, with a more specific time frame, was

anticipated after the next DMC meeting, which was expected to occur “pretty soon.” The DMC

would notify Orexigen when the number of events was close to the target, so that the company

could finalize preparations for the interim analysis.

August 2013 Update: On August 27, 2013, Orexigen announced the DMC’s confirmation that

sufficient MACE events for interim analysis in LIGHT are expected to occur within two months,

meaning that the DMC expects the 87th MACE event will occur within 8 weeks. Therefore, the

company expects the interim analysis of the LIGHT study to have been conducted by early

December 2013. Management guided that the Contrave NDA will then be resubmitted by YE13

(recall that the FDA is allowing resubmission based on the DMC summary report of the LIGHT

interim analysis, and will accept the complete clinical study report within 60 days). Additionally,

the company reiterated that the MAA for Contrave will be submitted prior to the interim analysis

of LIGHT, with the expectation that data will be ready for the CHMP Day 120 List of Questions.

Preparing For the Launch

The Ignite Study: In preparation for the launch of Contrave, Orexigen has initiated a

multicenter, randomized, open-label, controlled Phase IIIb method-of-use study designed to

provide additional information regarding the real world weight loss potential of Contrave. This

trial will assess the effects of Contrave used in conjunction with a commercially available,

comprehensive lifestyle intervention (CLI) program versus Usual Care, which is defined as a

self-directed, minimal lifestyle intervention program. The CLI program is a telephone-based,

interactive system with counseling, education, goal setting, and tracking tools. The study is

evaluating Contrave utilization in the manner intended after approval.

In February 2013, the trial completed enrollment (in 3 days) of approximately 240 adult patients

with BMI 30-45 kg/m2 or BMI 27-45 kg/m2 with dyslipidemia and/or controlled hypertension.

Diabetic patients are excluded. At week 26, patients originally assigned to the Usual Care arm

will switch to the Contrave/CLI arm. Those in the Contrave/CLI arm continue on treatment for

the duration of the study, which is 78 weeks. The primary endpoint is change in body weight

after 26 weeks. Secondary endpoints include categorical weight loss and changes in



anthropometric and cardiometabolic parameters. Results from the study are anticipated by

YE13.

E.U. Regulatory Front

In 4Q12, Orexigen submitted a MAA Letter of Intent (LOI) with the EMA. Orexigen met with the

EMA in 1H13 for pre-submission discussions. On May 8, 2013, the company reported that the

rapporteurs had been assigned.

Status Update: On August 6, 2013, in its 2Q13 Earnings Call, Orexigen reported that, having

met with the rapporteur (Denmark) and co-rapporteur (U.K.) for discussions about filing, it

planned to submit the MAA for Contrave to the EMA using the centralized procedure in 2H13

(“in the next few months”), before the LIGHT trial interim analysis. The company plans to have

CVOT data from LIGHT available for the CHMP Day 120 List of Questions. According to

management, the rapporteurs are supportive of this plan for MAA submission. The company

noted that the pediatric investigational plan (PIP) has been accepted, and the risk

management plan is currently being refined before submission (as per management, a key part

of this involves LIGHT, but may also include commitments for other components, such as a

registry program). Orexigen anticipates potential E.U. approval in “Fall 2014,” should there be

a positive CHMP opinion.

Orexigen Partnered with Takeda in North America and Mexico

In September 2010, Orexigen and Takeda announced a partnership to commercialize

Contrave in the U.S., Canada, and Mexico. Orexigen received an upfront payment of $50M

and is eligible for up to $1B in additional milestone payments, as well as tiered royalties of

20%-35% on net sales. Orexigen will be responsible for all pre-approval development costs,

the first $60M of post-approval development costs, and 25% of most post-approval

development costs. Takeda will be responsible for all post-approval manufacturing and

commercialization costs, plus 75% of post-approval development costs. Orexigen retains the

right to co-promote Contrave in North America and Mexico and intends to out-license ex-North

American rights for Contrave to a pharma partner.



Orexigen/Takeda partnership summary

Partner Takeda

GeographiesTakeda owns rights to U.S., Canada and Mexico;

Orexigen owns rights to rest of the wold

Partnership date Partnered with Takeda in September 2010

Upfront payment $50M

Royalty rate 20-35%

Next expected milestone

$20M on U.S. approval, $10M upon the delivery of

launch supplies to Takeda and $70M on first

commercial sales.

Total potential milestones up to $1B

Patent life US patents expire 2024-2025 Source: Cowen and Company, SEC Filings

Sales and Marketing Efforts

Orexigen has not yet disclosed the exact details of the sales and marketing effort that Takeda

will implement for Contrave. However, according to Orexigen, the companies have a multi-year

contractual commercial commitment, outlining specific agreements on marketing spend, sales

force compensation structure, and the minimum number of prescribers that Takeda will be

targeting. Orexigen has guided that Takeda expects to reach between 50,000+ prescribers. In

December 2012, at an Analyst Day, Orexigen discussed a theoretical scenario in which a sales

force of 500 representatives, having an average frequency of 12 calls a year per physician,

could target a total of 60,000 physicians in any given year. The figure below illustrates a

potential reaching frequency of a representative primary care launch.

We believe Takeda’s marketing strategy with its commitment of a sizeable primary care sales

force provides Contrave with a significant commercial advantage, enabling comprehensive

outreach to potential physician prescribers. The projected sales force for Contrave is

substantial, generating a potential advantage relative to other products in the market.

Orexigen’s IP Estate

Contrave is covered by an intellectual property estate for which Orexigen has exclusive rights.

The compositions of matter for Contrave as well as its use for obesity, will be protected in the

U.S. and abroad until at least 2024-25.

Orexigen holds U.S. Patents # 7,375,111 and 7,462,626, entitled Compositions For Affecting

Weight Loss. As stated in the patent abstracts, “Disclosed are compositions for affecting

weight loss comprising a first compound and a second compound, where the first compound is

an opioid antagonist and the second compound causes increased agonism of a melanocortin 3

receptor (MC3-R) or a melanocortin 4 receptor (MC4-R) compared to normal physiological

conditions. Also disclosed are methods of affecting weight loss, increasing energy expenditure,

increasing satiety in an individual, or suppressing the appetite of an individual, comprising



identifying an individual in need thereof and treating that individual to antagonize opioid

receptor activity and to enhance α-MSH activity.”

The company refers to these patents as the ―Weber/Cowley composition patent‖ and the

―Weber/Cowley methods patent,‖ respectively. Collectively, these patents are known as the

―Weber/Cowley patents‖ and cover the current composition of Contrave and methods of

administering Contrave to treat obesity. The composition patent expires in March 2025, and

the methods patent expires in July 2024. The European Patent Office has granted the

European version of the Weber/Cowley patents, published as EP1617832 B1. This patent has

been issued in numerous countries throughout the European Union, providing coverage for

Contrave until at least 2024. Orexigen has also filed a number of international patent

applications in foreign countries.



3) Big Pharma: Novo Nordisk’s Victoza (liraglutide)

Novo Nordisk’s Victoza (liraglutide) has been approved by the FDA (with a black box warning

about possible increased risk of thyroid cancer) and by the EMA for the treatment of diabetes

at doses of 1.2 mg and 1.8 mg (and 0.9 mg in Japan) once daily. Liraglutide is a long-acting

analog of glucagon-like peptide-1 (GLP-1), which increases insulin secretion and decreases

glucagon secretion. It also slows gastric emptying. The drug is in Phase III development for the

treatment of obesity in the non-diabetic setting.

Like other GLP-1 analogs, such as Amylin’s Byetta, Victoza has demonstrated an ability to

generate weight loss in its trials. In a 165-subject dose-ranging Phase IIb monotherapy study in

type 2 diabetics, patients at the highest dose of Victoza (1.8 mg) lost approximately 3 kg from

baseline vs. 1.2 kg on placebo after 14 weeks. Data from the 533-patient LEAD-4 trial, part of

Victoza’s Phase III diabetes program, demonstrated that patients treated with a combination of

Victoza, metformin, and Avandia experienced 2.5 kg weight loss at 26 weeks, compared to

patients administered metformin and Avandia.

In 2007, Victoza initiated a 550-patient, dose-finding, Phase II trial in obese subjects without

diabetes. This 20-week, double-blind study randomized participants to either Victoza, placebo,

or an open-label Xenical arm. Baseline BMI was 30-40 kg/m2, and the protocol included a low-

fat diet and exercise program. In November 2007, Novo Nordisk released positive results from

the study, demonstrating that patients who received Victoza at the highest dose had weight

loss from baseline of >7 kg versus weight loss of <3 kg in the placebo group and weight loss of

>4 kg in the Xenical treated group. All doses of Victoza reduced body weight. More than 75%

of the people treated with the highest dose experienced a weight loss greater than 5%, and

more than 25% experienced weight loss greater than 10% relative to their body weight at

randomization. The study revealed a beneficial effect on systolic blood pressure after treatment

with Victoza.

In addition, 30% of the participants showed signs of pre-diabetes at randomization. After 20

weeks of treatment with any dose of Victoza, 80-90% of patients no longer had any signs of

pre-diabetes, compared with approximately 40% in the placebo- and Xenical-treated groups.

Victoza was generally well tolerated. The overall withdrawal rate across the study was around

20%, and no more than 10% of patients treated with Victoza withdrew from the trial due to

adverse events. In a 32-week open label extension study, patients who were treated at the

highest dose experienced mean weight loss from baseline of 7.5-8.0 kg (5.5-6.0 kg as adjusted

for placebo). Approximately 75% of all treated subjects achieved >5% weight loss, and >35%

achieved >10% weight loss after 52 weeks of treatment vs. 25% and 10% of placebo subjects,

respectively.

Novo Nordisk completed enrollment for one of Victoza’s Phase III obesity studies in non-

diabetic patients with a history of hypertension or dyslipidemia. However, in mid-2009, Novo

Nordisk announced that two other Phase III trials would not be initiated until “more clarity on

the U.S. regulatory process for liraglutide for the treatment of type 2 diabetes” was obtained.



In June 2010, the company announced that, based on feedback from the FDA, it decided to re-

initiate the global Phase III liraglutide obesity program. The clinical trial program evaluating

safety and efficacy of liraglutide 3 mg for weight management is known as the SCALE (Satiety

and Clinical Adiposity-Liraglutide Evidence in Non-diabetic and Diabetic People) program. It is

comprised by four Phase III trials with approximately 5,000 obese (BMI ≥ 30 kg/m2) and

overweight (BMI ≥ 27 kg/m2) patients with comorbidities, such as hypertension, dyslipidemia,

or type 2 diabetes:

SCALE Maintenance: This was a 56-week, randomized, double-blind, placebo-controlled

evaluating weight loss maintenance with liraglutide 3 mg vs. placebo in 422 obese and

overweight patients after successfully achieving ≥ 5% weight loss during a 12-week run-in

period consisting of a lifestyle modification program with low calorie diet and exercise alone.

After the run-in period, patients were randomized for the 56-week main trial period to daily

liraglutide 3 mg or placebo. Patients then discontinued treatment and were followed for an

additional observation period of 12 weeks. Diabetic patients were excluded from the trial. The 3

co-primary endpoints were: 1) mean change in body weight from baseline; 2) proportion of

patients maintaining full run-in weight loss; and 3) proportion of patients losing ≥ 5% of body

weight from week 0 (i.e., achieving further weight loss after randomization).

SCALE Diabetes: This was a 56-week, randomized, double-blind, placebo-controlled trial in

846 obese and overweight patients with type 2 diabetes, evaluating safety and efficacy of

liraglutide 3 mg vs. liraglutide 1.8 mg and placebo to induce and maintain weight loss in

diabetic patients over 56 weeks, when added to background diabetes treatment, consisting of

metformin, a sulfonylurea, or glitazone as single-agents or in combination. Patients were

randomized 2:1:1 to treatment with daily liraglutide 3 mg, liraglutide 1.8 mg, or placebo.

Treatment was discontinued at 56 weeks, and patients were followed during an additional 12-

week observation period. The co-primary endpoints were: 1) change in mean body weight

from baseline; 2) proportion of patients losing ≥ 5% body weight from baseline; and 3)

proportion of patients losing ≥ 10% body weight from baseline.

SCALE Obesity and Pre-Diabetes: This is a 56-week/160-week randomized, double-blind,

placebo-controlled trial in 3,731 obese and overweight patients with comorbidities, evaluating

safety and efficacy of liraglutide 3 mg vs. placebo to induce and maintain weight loss, as well

as to delay onset of type 2 diabetes in pre-diabetic patients. Patients with known diabetes

(HbA1c ≥ 6.5%) are excluded from the trial. Patients without pre-diabetes are randomized 2:1

to daily liraglutide 3 mg or placebo for 56 weeks. After 56 weeks, patients are re-randomized to

receive liraglutide or placebo for an additional 12 weeks. Pre-diabetic patients are randomized

to liraglutide 3 mg or placebo for 160 weeks. The co-primary endpoints are: 1) change in mean

body weight from baseline to week 56; 2) proportion of patients losing ≥ 5% body weight from

baseline at week 56; 3) proportion of patients losing ≥ 10% body weight from baseline at week

56; and 4) proportion of patients with onset of type 2 diabetes at 160 weeks.

SCALE Sleep Apnea: This is a 32-week randomized, double-blind, placebo-controlled trial in

approximately 340 obese patients with moderate or severe obstructive sleep apnea (OSA),

evaluating efficacy of liraglutide 3 mg in combination with diet and exercise vs. placebo to



reduce the severity of OSA. Patients must be unwilling or unable to use continuous positive

airway pressure (CPAP) treatment and must not have had CPAP treatment for at least 4

weeks prior to screening. Diabetic patients (HbA1c ≥ 6.5%) are excluded from the trial.

Patients are randomized to daily liraglutide 3 mg or placebo, both in combination with diet and

exercise, for 32 weeks. The primary endpoint of the trial is change in apnea-hypopnea index

(AHI) from baseline.

SCALE Phase III Trial Program

Study Name SCALE Maintenance SCALE Diabetes SCALE Obesity and Pre-Diabetes SCALE Sleep Apnea

Study Type

Study Duration12-week run-in period, followed by a 56-week treatment

period, followed by 12-week observation period

56-week treatment period followed

by 12-week observation period

Without pre-diabetes: 56-week treatment

period, followed 12-week re-randomization

period

With pre-diabetes: 160-week treatment

period

32-week treatment period

Disease Setting

Obese/overweight patients who have achieved ≥ 5%

weight loss after 12-week run-in period of lifestyle

modification program with low calorie diet and exercise

alone

Obese/overweight patients with

type 2 diabetes

Obese/overweight patients with

comorbidities, including pre-diabetes

Obese patients with moderate or

severe obstructive sleep apnea

(OSA)

DemographicsBMI ≥ 30 kg/m

2 and BMI ≥ 27 kg/m

2 with comorbidities,

such as hypertension or dyslipidemia

BMI ≥ 27 kg/m2 with type 2

diabetes (HbA1c 7.0-10.0%)

BMI ≥ 30 kg/m2 and BMI ≥ 27 kg/m

2 with

comorbidities, such as hypertension or

dyslipidemia

BMI ≥ 30 kg/m2

with diagnosis of

moderate or severe OSA

Estimated Enrollment 422 846 3,731 340

Treatment Regimenliragultide 3.0 mg

vs. placebo

liragultide 3.0 mg vs.


placebo

(2:1:1 randomization)


placebo


placebo

Primary Endpoint

1) Mean change in body weight from baseline

2) Proportion of patients maintaining full run-in weight

loss

3) Proportion of patients losing ≥ 5% of body weight

from week 0 (i.e., achieving further weight loss after

randomization).

1) Mean change in body weight

from baseline

2) Proportion of patients losing ≥

5% body weight

3) Proportion of patients losing ≥

10% body weight

1) Mean change in body weight from

baseline to week 56

2) Proportion of patients losing ≥ 5% body

weight at week 56

3) Proportion of patients losing ≥ 10%

body weight at week 56

4) Proportion of patients with onset of type

2 diabetes at 160 weeks

Change in apnea-hypopnea index

(AHI) from baseline

Study Started October 2008 June 2011 June 2011 June 2012

Data

Announced/Expected2010 March 2013 May 2013 4Q13

Phase III, randomized, double-blind, placebo-controlled

Source: Cowen and Company, www.clinicaltrials.gov

Data from SCALE Maintenance: Results were presented at the ADA and EASD meetings in

2011. Patients in the trial had average age of 46 years and average BMI of 38 kg/m2, with an

average run-in weight loss of 6%. At 56 weeks after randomization, 81% of liraglutide patients

maintained this run-in weight loss, compared with 49% of placebo patients. Liraglutide

treatment also resulted in an additional mean weight loss of 6% after randomization, while

there was minimal additional weight loss (0.1%) in the placebo group. 51% of liraglutide

patients lost ≥ 5% of body weight after randomization, compared with 22% of placebo patients.

The most common adverse event was nausea, which occurred in 48% of patients.

Data from SCALE Diabetes: Topline data were announced in March 2013. Patients had

baseline mean weight of 233 pounds and baseline average BMI of 27 kg/m2. The trial



successfully met all three endpoints, with all differences for both liraglutide doses being

statistically significant. At 56 weeks, the mean weight loss in the liraglutide 3 mg and 1.8 mg

groups was 6% and 5%, respectively, compared with 2% in the placebo group. 50% (3 mg)

and 22% (1.8 mg) of liraglutide-treated patients lost ≥ 5% of body weight from baseline,

compared with 13% in the placebo group, while 35% (3 mg) and 13% (1.8 mg) of liraglutide-

treated patients lost ≥ 10% of body weight from baseline, versus 4% for placebo. During the 12

week follow-up period, patients from both liraglutide treatment groups had modest re-gain of

weight. Starting from baseline HbA1c of 8%, more patients in the liraglutide 3 mg and 1.8 mg

groups, 69% and 67%, respectively, achieved HbA1c level ≤ 7% (ADA target

recommendation), compared with 27% of placebo patients. The most common adverse events

were reported as gastrointestinal in nature.

SCALE Diabetes Efficacy Data

liraglutide 3

mg

liraglutide 1.8

mgPlacebo

Mean Weight Loss (%) 6% 5% 2%

>5% Weight Loss 50% 35% 13%

>10% Weight Loss 22% 13% 4%


Patients achieving HbA1c target of ≤ 7% 69% 67% 27% Source: Cowen and Company, Novo Nordisk

Data from SCALE Obesity and Pre-Diabetes: Topline data for all patients at 56 weeks were

announced in May 2013. The trial succeeded in all three co-primary endpoints at 56 weeks.

Patients had mean baseline BMI of 38 kg/m2, and 61% had pre-diabetes at randomization. At

56 weeks, the average weight loss with liraglutide 3 mg was 8% vs. 2.6% on placebo.

Liraglutide patients had greater categorical weight loss of ≥ 5% (64% vs. 27%) and ≥ 10%

(33% vs. 10%) compared to placebo. At 56 weeks, 69% of the pre-diabetes subgroup receiving

liraglutide eliminated signs of pre-diabetes, compared to 33% of the placebo group. Of the 39%

of patients without baseline pre-diabetes, 7% of liraglutide patients and 21% of placebo

patients eventually developed pre-diabetes. The company stated that all differences between

liraglutide and placebo were statistically significant, though specific statistical values were not

provided. The most common AEs were reported to be GI-related and diminishing over time.

What’s next? The Phase III SCALE Sleep Apnea trial was completed in 3Q13. The company

expects to file for approval of liraglutide 3 mg as an obesity treatment in the U.S. and E.U.

around YE13 (“around the turn of the year”).



4) Orexigen’s Empatic

Orexigen’s Empatic is a combination of bupropion and zonisamide, for the treatment of obese

patients with high BMI (high 30 kg/m2 range and beyond). Although zonisamide is rarely used

for weight loss, it does have appetite suppressant effects, which may be related to

enhancement of dopamine and serotonin neurotransmission. It is generally well-tolerated,

although headache and somnolence are reported to occur with some frequency. Zonisamide

went generic in the U.S. in 2005. As with naltrexone in Contrave, Orexigen has developed a

proprietary, sustained-release form of zonisamide, which has shown improved tolerability

compared to the generic IR form, with significant reduction in the incidence of spontaneous

adverse events. Empatic has been evaluated in two Phase IIb trials (Study ZB-201 and ZB-

202).

ZB-201: Empatic succeeds in its first Phase IIb trial

In study ZB-201, 623 otherwise healthy subjects with BMI 29-45 kg/m2 (average weight, 220

lbs.) were enrolled at 15 sites in the U.S. Patients were given minimal diet/exercise

interventions. Six different bupropion/zonisamide combinations were tested. Empatic treatment

resulted in 24-week, placebo-adjusted weight loss in the ITT group of up to 8.6%, and up to

10.3% in completers.

Patients who remained in the Phase IIb trial at 24 weeks were allowed to continue through 48

weeks of double-blind treatment. Those failing to achieve 5% weight loss at 24 weeks in any

group were permitted to switch to the open-label Z360/B360 dose during this extension. At 48

weeks, Empatic treatment resulted in placebo-adjusted weight reductions of up to 12.9% in the

ITT group, and of up to 13.9% among completers. We view these levels of weight loss as

promising, and the observation of robust weight loss continuing after six months is a notable

feature of this combination treatment. With evidence of a continued trend of weight loss at the

end of the 48-week period, it is likely that additional reductions may occur with longer-term

therapy. As this extension was conducted under double-blind conditions, the data are likely to

better represent Empatic’s efficacy, compared with typical open-label designs.

ZB-202: Empatic goes 2-for-2 in second successful Phase IIb study

In September 2009, Orexigen released positive data from a 24-week, Phase IIb trial of Empatic

in 729 obese and overweight patients (BMI range 27-45 kg/m2). Patients were randomized to

one of six arms: two Empatic groups (Bup360/Zon360, Bup360/Zon120), three single-

treatment groups (Bup360/placebo, Zon360/placebo, Zon120/placebo), and placebo. Patients

treated with Empatic360 and Empatic120 had significantly greater average weight loss from

baseline, 7.5% and 6.1%, respectively, compared with placebo (1.4%, p≤0.001). Weight loss in

the Empatic groups was also greater than that achieved with zonisamide (3.2% and 5.3%) or

bupropion (2.3%) alone. There was no plateau in weight loss observed at 24 weeks, and this

may indicate the potential for greater weight loss with treatment over a longer period.



The most common side effects were nausea, headache, and insomnia. The most common AEs

resulting in discontinuation were insomnia, headache and urticarial (hives). According to

Orexigen, no patients experienced serious AEs related to Empatic, and there were no

statistically or clinically meaningful difference in incidence of depression, anxiety, suicidality,

and impaired cognition with Empatic treatment compared to placebo. Our consultants have

noted these potential CNS effects as causing some hesitation to use zonisamide, and they are

interested to see results in a larger patient population receiving Empatic.

What’s next for Empatic? In March 2013, Orexigen announced that, in a series of

discussions about continued development of Empatic, FDA indicated Phase III data for

Empatic may be sufficient to support a NDA submission without additional data from a CVOT.

Also, the company guided that, should there be no CV signals in the Empatic development

program and if placebo-adjusted body weight, blood pressure, and heart rate changes are

similar to or more favorable than those observed with Contrave, FDA has stated ―reassuring

results of a CVOT with Contrave will be sufficient.‖ Furthermore, Orexigen reported that the

FDA will allow Phase III studies of Empatic to include women of childbearing age, despite

teratogenicity concerns resulting from the zonisamide component.

Orexigen has indicated its thinking at this point that, prior to initiating Phase III development of

Empatic, it seeks a collaboration partner to help fund clinical development and future

commercialization.



5) The Novel Mechanism: Zafgen’s Beloranib

The private company Zafgen is developing beloranib, a novel injectable agent that inhibits

methionine aminopeptidase 2 (MetAP2), a key enzyme in the control of the production and

utilization of fatty acids. Beloranib is a highly selective MetAP2 inhibitor, which is being

developed as a twice-weekly, subcutaneous injection for severe obesity. Beloranib has shown

very promising activity in its Phase Ib trials, and is currently in a Phase IIa trial for the treatment

of severely obese patients.

Data from two Phase Ib trials, 2012 Obesity Society meeting: Data from two Phase Ib trials

were presented at the 2012 Obesity Society meeting in San Antonio. Both trials were

randomized, double-blind, placebo-controlled studies, designed to evaluate the safety,

tolerability, and metabolic effects of twice-weekly administered beloranib in severely obese

women. In one trial, beloranib was administered by IV, and in the second trial, beloranib was

administered subcutaneously. Patients were allowed to eat normally and were not counseled

to change their exercise habits.

1) Phase Ib trial, IV administration: The trial enrolled 16 severely obese women (BMI 39.5

kg/m2) who were randomized into three arms: 3.0 mg (n=6), 6.0 mg (n=5), and placebo (n=5).

14 patients (6 patients in 3.0 mg arm, 3 patients in the 6.0 mg arm, and 6 patients in the

placebo arm) completed treatment, and data for these patients were reported.

Efficacy Data: After four weeks, patients in the 3.0 mg arm lost an average of 4.7 kg from

baseline (p=0.0008), and patients in the 6.0 mg arm lost an average of 6.7 kg (p=0.0013),

while patients in the placebo arm gained 0.2 kg. Hunger tended to be reduced on beloranib (-

28% for 3.0 mg arm, -52% for 6.0 mg arm, compared to -2% for placebo). Body composition

measurements were consistent with reduced adipose tissue mass.

Safety Data: The most frequent AEs were mild diarrhea, nausea, headache, dizziness,

infusion site injury, and mild-to-moderate sleep disturbance, which resulted in two drop-outs

from the 6.0 mg arm. There were no clinically significant, abnormal laboratory or ECG findings.

Doses less than 6.0 mg appeared to have clinical utility in balancing effectiveness and

tolerability.

2) Phase Ib trial, Subcutaneous administration: This trial enrolled 25 obese women (BMI,

34 to 36.4 kg/m2) who were randomized into four arms: beloranib (twice-weekly for 4 weeks) at

1.0 mg (n=6), 2.0 mg (n=6), 4.0 mg (n=7), or placebo (n=6). 21 patients (6 patients in the 1.0

mg arm, 5 patients in the 2.0 mg arm, 4 patients in the 4.0 mg arm, and 6 patients on placebo)

completed treatment, and data for these patients were reported.

Efficacy Data: After four weeks, patients in the 1.0 mg arm lost an average of 4.3 kg from

baseline; patients in the 2.0 mg arm lost an average of 4.2 kg, and patients in the 4.0 mg arm

lost an average of 6.1 kg (all p<0.001). Patients receiving placebo lost 1.2 kg from baseline.

Hunger tended to be reduced with beloranib (-42% for the 1.0 mg arm, -45% for the 2.0 mg

arm, -46% for the 4.0 mg arm, compared to -22% for placebo arm).



Safety Data: The most frequent AEs were decreased appetite, vivid dreams, and sleep

disturbance, which resulted in two drop-outs from the 4.0 mg arm. There were no severe AEs,

serious AEs, or deaths. There were no clinically significant, abnormal laboratory or ECG

findings. Subcutaneous doses of beloranib less than 4.0 mg appeared to have clinical utility in

balancing effectiveness and tolerability.

Current Status: Based on the activity observed in the two Phase Ib trials, Zafgen advanced

beloranib into Phase II development. In November 2012, a Phase IIa clinical trial testing

beloranib for the treatment of severe obesity was initiated. This is a randomized, double-blind,

placebo-controlled, dose ranging, Phase IIa trial evaluating weight loss, safety, and PK with

beloranib in ~150 obese patients, both with and without type 2 diabetes. Patients will be

randomized to receive either placebo or beloranib as a subcutaneous injection for 12 weeks.

They are allowed to eat normally and are not counseled to change their exercise habits. The

primary endpoints of the trial are safety and change in body weight from baseline.

Phase IIa Trial Interim Data, ADA 2013: Interim data for 19 patients who completed the 12-

week treatment period were presented at the ADA meeting in June 2013. Enrolled patients

have a mean age of 40 years, with an average body weight of 101.2 kg and BMI of 37.9 kg/m2.

There were 148 patients randomized to treatment with beloranib 0.6 mg (n=37), 1.2 mg (n=37),

or 2.4 mg (n=36), or placebo (n=38). The 19 patients for which data were presented had been

randomized as follows: beloranib 0.6 mg (n=5), 1.2 mg (n=6), or 2.4 mg (n=3), and placebo

(n=5). After 12 weeks of treatment, patients treated with 0.6 mg, 1.2 mg, or 2.4 mg of beloranib

had average weight losses of 3.8 kg, 6.1 kg, and 9.9kg, respectively, compared with a weight

gain of 1.8 kg in the placebo group (all p<0.005 vs. placebo). The most common AEs with

beloranib included nausea, vomiting, and sleep disturbance. There were no serious AEs or

deaths. Full data from the trial are expected in 2013.

6) Another Novel Mechanism: Rhythm’s RM-493

Private company Rhythm Pharmaceuticals is developing RM-493, a selective, small-peptide

melanocortin-4 receptor (MC4R) agonist, for the treatment of obesity and diabetes. The MC4

receptor is a G-protein-coupled receptor which is expressed in cells of the hypothalamus, and

is the main melanocortin receptor involved in control of food intake. MC4R modulates both an

agonist signal from the pro-opiomelanocortin (POMC) derivative α-melanocyte stimulating

hormone (α-MSH) which is anorexigenic (appetite suppressing), and an antagonist signal from

Agouti-related peptide (AgRP) which is orexigenic (appetite stimulating). The balance in these

neuropeptide effects on MC4R activation regulates food intake, energy expenditure, and body

weight. It is estimated that MC4R mutations account for up to 6% of severe obesity cases, and

they are the most common cause of monogenic (resulting from mutations in a single gene)

genetic obesity.

In preclinical animal studies, treatment with RM-493 was associated with reduction in food

intake and decreases in body weight. RM-493 is currently in Phase II clinical development.



Preclinical Studies: Results from preclinical evaluation of RM-493 in a non-human primate

(monkeys) model of diet-induced obesity were published in 2012 (Kievit P et al., Diabetes

2012). A dose response study, evaluating doses of 0.17, 0.5, and 1.5 mg/kg/day) in lean

animals demonstrated that a RM-493 dose of 0.5 mg/kg/day maximally reduced food intake,

and this dose was used for further study. Twelve adult (age 9-11 years) male rhesus macaque

monkeys, with body weights of 9-19 kg, were studied. The monkeys had been provided a high-

fat diet (32% of calories from fat) and daily calorie-rich treats for 1.5 years. Nine monkeys were

obese, insulin-resistant, and hypertensive; they were classified as ―diet-sensitive.‖ Three

monkeys had normal body weight and blood pressure, and were classified as lean or ―diet-

resistant.‖ The animals were treated with delivery vehicle alone for 4 weeks to obtain baseline

values. Then, they received 0.5 mg/kg/day of RM-493 for a total of 8 weeks.

Efficacy Results in Monkeys: Food intake decreased significantly, by 35%, in the first week

of treatment with RM-493. However, food intake then normalized by weeks 4 through 7 and

increased by 8 weeks, compared to levels during the previous vehicle delivery alone period.

Both the obese and lean monkey groups showed comparable decreases in food intake. The

monkeys lost an average of 1 kg of body weight during the first 4 weeks of treatment. They

also continued to lose weight through the treatment period, with a total average weight loss of

1.5 kg (~10%) at 8 weeks. The average peak weight loss was 13.5% of body weight, with 8/12

of the monkeys continuing to lose weight for 2 weeks after treatment was discontinued.

Daytime activity was noted to increase during the treatment period, nearly doubling by Week 8,

through there was no significant relationship between weight loss amount and activity increase

on statistical analysis. Energy expenditure (measured by carbon dioxide production) was also

increased by 14% at the end of treatment.

CV Safety Results in Monkeys: Potential cardiovascular side effects of increased heart rate

and blood pressure have been associated with MC4R agonist treatment in humans. The

monkeys were implanted with telemetry devices in order to measure blood pressure and heart

rate during the delivery vehicle and treatment periods. Throughout the RM-493 treatment

period, there were no increases in heart rate or blood pressure measured in the animals. Heart

rate significantly decreased in the treatment period, compared to the delivery vehicle period

(average morning HR 128 bpm vs. 141 bpm; average evening HR 98 bpm vs. 111 bpm;

p=0.008 for the course of the treatment). There were also decreases in DBP during treatment

compared to the delivery vehicle period (79-80 mm Hg vs. 83-84 mm Hg), whereas SBP did

not significantly differ (129-130 mm Hg vs. 129-133 mm Hg).

Phase II Trial in Obese Patients: This is a randomized, double-blind, placebo-controlled,

Phase II trial evaluating RM-493 versus placebo in adult (ages 18-65 years) obese patients,

with BMI range of 35-50 kg/m2. Patients must have had stable body weight (± 5 kg) in the prior

6 months, and blood pressure must be < 140/90 mm Hg, with use of up to 2 anti-hypertensive

medications allowed. Patients with uncontrolled hypertension, diabetes (fasting blood glucose

> 140 mg/dL and HbA1c ≥ 6.5%), and psychiatric disorders (including major depression) are

excluded. Treatment will be administered with RM-493 (1 mg/14 hrs via subcutaneous

infusion) for 90 days or placebo (subcutaneous infusion) for 90 days. The primary endpoint of

the trial is mean percentage change in weight loss. Secondary endpoints include the proportion



with loss of ≥ 5% baseline body weight, PK, effect on hunger/satiety, quality of life, and safety.

The trial has an estimated enrollment of 70 patients and an estimated completion date in

October 2013.

Phase Ib Trial in Patients with MC4R Gene Deficiency: In September 2013, Rhythm

announced initiation of the first in a series of RM-493 trials for treatment of obesity in patients

with a genetic loss-of-function deficiency in the MC4R pathway. This is a Phase Ib trial which

will evaluate efficacy and safety of RM-493 in obese patients with a loss-of-function mutation in

the MC4R gene. Patients will receive up to 4 weeks of treatment with RM-493. According to

Rhythm, this study expands the ongoing Phase II program.



Beyond BELVIQ: Arena’s Four Pipeline Candidates

In addition to BELVIQ, Arena is developing additional product candidates for the treatment of

autoimmune diseases, pulmonary arterial hypertension (PAH), and multiple sclerosis. Arena’s

early stage pipeline includes temanogrel, APD811, APD334, and APD371.

Temanogrel: Temanogrel, an inverse agonist of the serotonin 2A receptor, is being co-

developed by Arena and Ildong Pharmaceutical for the treatment of thrombotic disease.

Platelet activation is an initial event in thrombus formation, with resultant release of factors,

including serotonin, which cause aggregation and adherence. Serotonin promotes platelet

aggregation and also causes vasoconstriction, and these effects are mediated by the 5-HT2A

receptors. Inverse agonists of the 5-HT2A receptor may inhibit these effects. In preventing

serotonin-mediated platelet aggregation and reversing serotonin-mediated vasoconstriction,

temanogrel has a potential dual mechanism of action which may be relevant for treatment or

prevention of thrombotic diseases.

Arena has completed two Phase I trials of temanogrel. Ildong is responsible for funding and

conducting the next two planned clinical trials of temanogrel, which include a Phase I multiple-

dose trial in healthy volunteers and a Phase IIa proof-of-concept trial. According to Arena,

Ildong plans to initiate the Phase I trial by YE13.

Phase Ia trial: The first Phase Ia trial was initiated in July 2007. This was a randomized,

double-blind, placebo-controlled, single-ascending dose trial designed to evaluate temanogrel

in 90 healthy volunteers. Initially the intended doses for this trial ranged from 1 mg to 160 mg,

but the maximum dose was increased to 320 mg because of favorable tolerability. Dose-

dependent inhibition of serotonin-mediated platelet aggregation was demonstrated. The MTD

could not be defined, despite achieving high blood concentrations of the drug.

Phase Ib trial: The Phase Ib trial was initiated in January 2008. This was a randomized,

double-blind, placebo-controlled, multiple-ascending dose trial in 50 healthy volunteers who

received total daily doses ranging from 15 mg to 80 mg. The goal of the study was to evaluate

safety, tolerability, pharmacokinetics and pharmacodynamics of multiple-ascending doses of

temanogrel over a period of one week. Dose-dependent inhibition of serotonin-mediated

platelet aggregation was demonstrated starting at the 15 mg dose. This may permit

identification of exposure ranges producing minimal, moderate and near-complete inhibition of

serotonin-mediated platelet aggregation. The most frequent AE was headache, which was

more common in the placebo group than in any temanogrel group. No adverse events were

dose-related, with the exception of epistaxis, which occurred in two volunteers receiving the 80

mg dose, which is above the anticipated therapeutic range.

APD811: This agent is an orally available agonist of the prostacyclin (IP) receptor, intended for

the treatment of pulmonary arterial hypertension. In October 2012, Arena initiated a

randomized, double-blind, Phase Ib multiple ascending dose titration trial that enrolled 55

healthy volunteers (40 received APD811 and 15 received placebo). The trial evaluated safety,

tolerability, pharmacokinetics, and the optimal titration schedule for APD811.



In August 2013, Arena announced the completion of the Phase Ib trial. There were no serious

adverse events observed. The most frequent treatment-emergent AEs were headache,

nausea, and jaw pain. There was one serious AE, transient atrial fibrillation, which occurred in

a single patient and was considered possibly treatment related.

Arena announced that a Phase II trial of APD811 will be initiated in 1Q14.

APD334: This agent is a S1P1 (sphingosine 1-phosphate subtype 1) receptor agonist,

currently in Phase I development for the potential treatment of autoimmune diseases, including

multiple sclerosis and rheumatoid arthritis. S1P1 receptors are involved in the modulation of

several biological responses, including lymphocyte trafficking from lymph nodes to peripheral

blood. Five S1P receptors have been identified. A non-selective oral S1P agonist, fingolomod,

(Novartis’s Gilenya) has demonstrated lowering of lymphocyte counts in blood and is approved

for the treatment of multiple sclerosis. Arena has optimized potent and selective small

molecule S1P1 receptor agonists, such as APD334, that reduce severity of disease in

preclinical autoimmune disease models of multiple sclerosis, such as the experimental

autoimmune encephalomyelitis (EAE) model and the collagen-induced arthritis (CIA) model.

Phase I trial: In April 2013, Arena announced the advancement of APD334 into Phase I

clinical development with the initiation of dosing in a Phase I randomized, double-blind,

placebo-controlled trial, evaluating safety, tolerability and PK of single-ascending doses of

APD334 in up to 64 healthy adult volunteers. In August 2013, Arena reported that dosing was

completed in the trial. Preliminary results demonstrated reduction in blood lymphocyte count

(the desired benefit), but a reduction in heart rate (an AE observed with other S1P1-targeting

drugs). Further data evaluation is ongoing.

APD371: This agent is a CB2 receptor agonist currently in preclinical development for the

treatment of pain. Arena has identified several novel, potent, CB2-selective, orally available

compounds that are intended to retain the analgesic activity of CB receptor agonists while

avoiding psychotropic side effects.



So, What Do Physicians Think About All This?

Our Two Obesity Surveys

Obesity remains, and according to most experts and projections, will continue to be a major

public health issue in the United States and a significant portion of the developed world. The

most recent national data from the CDC on obesity prevalence indicate that more than one-

third of U.S. adults (35.7%) are obese, equating to over 71 million people. According to NIH

guidelines (Clinical Guidelines on the Identification, Evaluation, and Treatment of Overweight

and Obesity in Adults: The Evidence Report, NIH Publication 98-4083) on obesity treatment,

pharmacotherapy may provide a beneficial adjunct to dietary, activity, and behavioral

modifications in selected individuals, including: those with BMI ≥ 30 kg/m2 (obese) and no

concomitant risk factors, or those with BMI ≥ 27 kg/m2 (overweight) and comorbidities such as

hypertension, dyslipidemia, type 2 diabetes, coronary artery disease (CAD), and sleep apnea.

There has been a difficult market history for weight-loss drugs, stymied by major safety issues.

After more than a decade without the approval of a new weight-loss drug, and after handing

out an initial round of rejections to each of the three most recent anti-obesity agents under

review, the FDA approved BELVIQ (lorcaserin, Arena Pharmaceuticals) in late June 2012.

Three weeks later, in July 2012, Qsymia (phentermine/topiramate, Vivus) was also approved.

Qsymia became available in the U.S. market first, in mid-September 2012, and BELVIQ was

commercially launched in June 2013. The third agent, Contrave (naltrexone/bupropion,

Orexigen Therapeutics) was also denied approval by the FDA in 2011, based on

cardiovascular safety concerns, with a cited requirement for a cardiovascular outcomes trial

(CVOT). The FDA has notified Orexigen that it supports a faster path to NDA resubmission for

Contrave and provided guidance on design of the LIGHT study, the Contrave CVOT, which

has completed enrollment and is currently ongoing. Interim analysis of the LIGHT Study is

expected by December 2013, and NDA resubmission is anticipated by YE13.

In order to gain further insight into the evolving obesity therapeutics market and to gauge

physician perceptions of these new agents, we have conducted two surveys with a total of 100

U.S. physicians. The first survey polled 50 primary care physicians (PCPs) who, while not

specializing in obesity management, have familiarity with the clinical profiles of the new obesity

drugs and would be open to using these agents in their practices (―The PCP Survey‖). The

second survey polled 50 physicians who specialize in obesity management and currently

prescribe weight-loss medications (―The Obesity Specialist Survey‖).

We report the findings from both of our surveys. Our key conclusions follow:

1) Qsymia is considered to have the strongest weight-loss efficacy and is projected to

be the obesity drug market leader. Despite the majority of PCPs in our survey having no

(62%) or very little (28%) experience using Qsymia so far, more than half considered Qsymia

to be the most efficacious weight-loss agent. Our specialists concurred with this opinion and

were even more positive, with 68% considering Qsymia to produce the best weight loss among



obesity therapies. A clear majority (near three fourths) of our specialists projected Qsymia to

have a ≥ 60% market share relative to BELVIQ.

2) All three new obesity drugs will potentially share the obesity drug market. Assuming

approval of Contrave and its availability along with Qsymia and BELVIQ, most PCP

respondents in our survey feel that all three drugs will be used, though with an uneven

allocation in the market. (And here, more expect Qsymia to have the advantage). Our

specialists agree with this outlook. Like PCPs, specialists expect all three drugs to have some

use in patients, while they too think that Qsymia will dominate overall.

3) Safety issues are not likely to stand in the way of obesity drug uptake. While

physicians are familiar with potential safety issues of these new therapies, safety does not

appear to present a major barrier to utilization. PCPs generally expressed moderate concern

about specific risks potentially associated with Qsymia, BELVIQ, or Contrave, such as

teratogenicity, serotonin syndrome, and cardiovascular concerns. However, only 30% viewed

safety and tolerability issues as significant enough to prevent adoption. Specialists tended to

be more even more comfortable, with fewer than 15% of respondents identifying a specific

concern which would present a barrier to uptake of these respective drugs.

4) Cost and reimbursement are the key concerns weighing on physicians’ minds about

these drugs. Both PCPs and specialists most frequently cited drug costs and lack of

reimbursement as the most significant hurdles to wide use of the new anti-obesity agents. Most

physicians in both groups remain relatively pessimistic about insurance coverage for these

agents. Given cost concerns, when possible, both PCPs and specialists appear willing to use

generic substitutions for branded agents. In our surveys, PCPs (76%) seemed more willing in

this regard, but a significant proportion of specialists (58% and 54% regarding Qsymia and

Contrave, respectively) also indicated comfort with prescribing generics.



Survey Methodology

1) The Primary Care Physician (PCP) Survey

We surveyed 50 primary care physicians (PCP) across the United States. Given our view that

the commercial success or failure of these new anti-obesity drugs will be determined by how

well received and how widely prescribed they will be by the PCP community, we specifically

wanted to gain insights into these non-specialist physicians’ views on these drugs. Therefore,

in this survey, we sought the opinion of PCPs who did not consider themselves to be

specialists in the treatment of obesity, and we pre-screened respondents using this criterion

(see full questionnaire, including the four screening questions, at the back of this report).

However, we did seek survey participants who were knowledgeable about the therapeutic

area. Therefore, we also required respondents to be familiar with the efficacy and safety data

from the clinical trials of Qsymia and BELVIQ. In addition, physicians needed to be willing to

treat patients with these agents in their clinical practices.

We received a total of 50 responses from PCPs meeting the screening criteria. The physicians

were from diverse regions across the U.S., representing 28 states. The majority of respondents

were either solo practitioners or based in group practices.

2) The Obesity Specialist Survey

For our second survey, we polled 50 physicians who specialize in the management of obesity

across the United States. We sought physicians whose clinical practices primarily focus on the

care of obese patients. Respondents were prescreened according to this criterion. We also

screened for physicians who currently prescribe anti-obesity drugs in their practices.

We collected a total of 50 responses from obesity specialist physicians who met the screening

criteria. These physicians were geographically diverse, representing 22 institutions, in 19

states across the U.S. All respondents were affiliated with either tertiary academic medical

centers or specialized clinical centers dedicated to weight management.



#1) The PCP Survey Results

Primary care physicians (PCPs) are the front-line providers of care for obese and overweight

patients. In order to understand the perspective of this physician segment on the new obesity

therapies, we conducted a survey limited to self-identified PCPs who did not consider

themselves specialists in obesity treatment. We selected for PCPs with 1) knowledge of the

efficacy and safety data for Qsymia and BELVIQ, and 2) willingness to treat patients in their

practices with these agents.

PCP experience with Qsymia remains limited in our survey

In the months after the commercial launch of Qsymia in the U.S., clinical experience with the

drug by PCPs remains fairly low. A significant majority of our surveyed physicians (62%)

reported having no experience with Qsymia use in their patients, while 90% of the respondents

had treated only up to 5 patients each. Looking at these numbers in another way, only 10% of

our responding PCPs had treated more than 5 patients using Qsymia, and among that 10%,

about half had treated between 6 and 10 patients, and the other half had treated between 16-

20 patients. No physician among the 50 PCPs we surveyed had treated more than 20 patients.

In our survey, PCP experience with Qsymia to date is limited

62%

28%

6%

0%4%

0% 0% 0%0%

10%

20%

30%

40%

50%

60%

70%

None 1-5 6-10 11-15 16-20 21-30 31-49 >50

How many patients have you treated with Qsymia since it became commercially available in September 2012?

Source: Cowen and Company, Epocrates

We asked the physicians who had not yet treated any patients with Qsymia to elaborate further

and answer the “Why not?” question. A number of them expressed general cautiousness

about the use of new drugs and tendency for slow uptake of medications with which they are

not familiar. Others delineated issues with cost and availability of Qsymia. We have included all

the individual answers we received in response to the ―Why not‖ question in the next figure.



PCPs list multiple reasons for lack of Qsymia use

• No rep...haven't researched it enough

• The amount of weight loss is not worth the expense or risk of potential side effects

• Nervous about about any product with phentermine

• Paperwork at this time

• Just have not had new patient requests for medication treatment of obesity

• I am still gaining familiarity with this product

• Hesitant to Rx new medication

• Although open to idea to use, am still cautious

• I use the generic versions broken into two meds rather than expensive branded

• Drug cost prohibitive for my patient population

• Waiting a year or two for post launch adverse event data to be gathered

• I am always slow to use new drugs

• No one has requested it, and I haven't volunteered to treat since diet and exercise is the best way to lose weight

• Not on formulary

• Waiting for a patient who wants to pay the Brand price and has failed phentermine alone (as most wish to do first)

• Not covered by insurance

• It is not in local pharmacies

• Usually wait 6 months before using new product

• Just discovered it, was briefed on it for first time...last week


Nevertheless, Qsymia is considered the most efficacious weight loss agent...

Despite limited clinical experience with the drug, our survey results show that many PCPs

maintain a very positive view of Qsymia and consider it to be superior to BELVIQ and other

weight-loss drugs. When asked to choose the agent with best weight-loss efficacy, 52% of our

respondents selected Qsymia from a list which included other approved and investigational

anti-obesity agents. The next agent from the list considered most efficacious was phentermine,

notably a component of Qsymia, selected by 18% of physicians, while BELVIQ was selected

by just 12% of respondents.



Half of surveyed PCPs selected Qsymia as the most efficacious weight-loss drug

52%

12%

0% 2% 0% 2%

18%

2%

12%

0%

10%

20%

30%

40%

50%

60%

Qsymia Belviq Contrave Liraglutide Empatic Orlistat Phentermine Other None of thesedrugs result

in what Iconsider to be

meaningfulweight loss

In my opinion, the anti-obesity drug that results in the most robust weight loss is:


The PCPs in our survey favor Qsymia, but we also note that they generally consider weight-

loss drugs to potentially be efficacious for their patients. In response to our question about the

anti-obesity drug with the best efficacy, only 12% of respondents indicated that none of the

approved and investigational agents listed would result in meaningful weight loss.

...and PCPs expect it to lead the market over BELVIQ.

Furthermore, focusing on the two most recently approved weight-loss therapies, we asked

physicians to project the market shares for Qsymia and BELVIQ at 1-year after BELVIQ’s

launch. A 62% majority of our physicians forecasted Qsymia to be the dominant leader, with ≥

60% share of the market. Fewer than 30% of physicians indicated that the market would be

split evenly between the two drugs, and only 10% of surveyed PCPs believed that BELVIQ

would have greater uptake than Qsymia.



Most surveyed PCPs expect Qsymia to lead the market over BELVIQ: 62% for Qsymia lead vs. 10% for BELVIQ lead vs. 28% for a market split

10%

28%

24%

28%

2%

8%

0%

0% 5% 10% 15% 20% 25% 30%

Qsymia 90%, Belviq 10%







One year after Belviq’s launch, I would expect that Qsymia and Belviq will have split the anti-obesity market in the following way:


Our PCPs will also use Contrave, if approved; however, Qsymia seems to be the

agent of choice in our group of PCPs

With the potential approval of a third new weight-loss agent, Contrave, on the horizon, possibly

sometime in 2014, we were interested to find out the PCP perspective on use of all three of

these new drugs. We asked physicians to project to a time with full availability of all three drugs

and to consider multiple market-split scenarios.

12% voted for an even split among the three drugs

One-fourth of the PCPs voted for the ―one-drug-really-dominates-the-market‖

scenario, or the 80/10/10 split, and Qsymia dominated the vote there with 18%, vs.

just 4% and 2% for BELVIQ and Contrave, respectively.

Similarly, approximately half of the PCP’s (52%) voted for scenarios of one dominant

drug in the market, i.e. the 60/20/20 or the 80/10/10 splits. Again, Qsymia was the

clear winner here, with 38% vs. 10% and 4% for BELVIQ and Contrave, respectively.

However, a third of our PCPs expect two agents to share the lead position in the

market (40% each). Again, Qsymia was more often the drug included as one of the

two leads (26% of votes). That does show that our physicians believe there is room

for multiple drugs to be used in this space, possibly reflecting the fact that there are

several patient types that may benefit from different characteristics of each agent.



Surveyed PCPs view Qsymia as the dominant one, but expect to use of all three new weight-loss agents

18%

4%

2%

20%

6%

2%

16%

8%

10%

12%

2%

0% 5% 10% 15% 20% 25%

Qsymia 80%, Belviq 10%, Contrave 10%

Belviq 80%, Qsymia 10%, Contrave 10%

Contrave 80%, Qsymia 10%, Belviq 10%





Belviq 40%, Contrave 40%, Qsymia 20%



Other market split

Assuming Contrave is approved, 18-24 months from its launch, I believe the obesity drug market will be split in the following way:


What about treatment duration? PCPs much more optimistic (out of touch?)

than in recent history

Again focusing on the two newly approved weight-loss drugs, we asked our PCPs to indicate

the anticipated average duration of therapy on either Qsymia or BELVIQ for their patients. 78%

of the physicians expected the treatment duration to be 5 months or longer, including 38% who

expected an average patient would remain on therapy for close to a year (10-12 months) or

longer than a year. This assessment by PCPs may be a too optimistic outlook and expectation

for these drugs, in the context of a therapy category with poor patient adherence in the long-

term historically. In recent investor calls, Vivus management has indicated that Qsymia’s

―persistence rate,‖ which could be a surrogate for treatment duration, was approximately 3.4

months. In our survey, only 22% of the PCPs expected the average treatment duration to be

between 0-4 months.



Most surveyed PCPs anticipate significant Qsymia/BELVIQ treatment duration

2%

20%

36%

4%

20%18%

0%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0-2 months 3-4 months 5-6 months 7-9 months 10-12 months >12 months Other

How long would you expect the average Qsymia and Belviq patient to remain on therapy?


What about safety? They all have their issues, and none of them really stand

out…

Safety issues have caused a troubled history for weight-loss agents and resulted in the

withdrawal of multiple drugs from the U.S. market. Prior to the approvals of BELVIQ and

Qsymia in June and July 2012, respectively, these withdrawals had left orlistat as the only

prescription drug approved for the long-term treatment of obesity. We sought to ascertain how

safety concerns might impact our physicians’ utilization of the new anti-obesity drugs. In our

survey, we asked respondents to choose the drug with the best safety profile from a list which

included approved agents (Qsymia, BELVIQ, orlistat, phentermine) and agents under

investigation (Contrave, Empatic, liraglutide). The answers we received show that no agent

was singled out by physicians with regard to safety, and indeed the responses were fairly

evenly distributed among the approved agents. Interestingly, Contrave and Empatic received

zero votes from our PCPs as the safest choice, while one-fifth of our respondents indicated

that safety and tolerability concerns of the listed weight-loss drugs would prevent clinical use in

patients.



PCPs in our survey didn’t differentiate any obesity drug as safer than the others

16% 16%

0%

4%

0%

20%22%

2%

20%

0%

5%

10%

15%

20%

25%

Qsymia Belviq Contrave Liraglutide Empatic Orlistat Phentermine Other I believe thatthe safety and

tolerabilityprofile of

these agentswould likelyprevent mefrom using

them in mostof my patients

The obesity drug with the cleanest safety and tolerability profile is:


…but BELVIQ fared better in terms of “comfort” than Qsymia

To investigate in further detail, we focused on some specific safety issues which have been

associated with Qsymia, BELVIQ, and Contrave. These potential concerns were highlighted by

crafting specific patient types for each agent. We then asked our PCPs to rate their comfort

level with prescribing on a scale of 1 (very comfortable) to 5 (not comfortable).

Qsymia: The most highlighted concerns with Qsymia have been teratogenicity and heart rate

elevations. In particular, data have suggested that women exposed to topiramate during

pregnancy have an increased risk of orofacial cleft formation in offspring. Qsymia approval

required a risk evaluation and mitigation strategy (REMS) program, including educational

efforts on teratogenic risk for patients and physicians. With regard to Qsymia, we specified

women of child-bearing age and patients at increased CV risk as patient types to focus on

these concerns.

BELVIQ: Over the course of BELVIQ’s development, identified safety concerns have included

potential tumorigenicity, numerical imbalances in occurrence of cardiac valvulopathy, as well

as risks of psychiatric, cognitive, and serotonergic adverse effects. We therefore specified

patient types with potential risk factors, such as increased malignancy risk, increased CV risk,

and those taking selective serotonin reuptake inhibitors (SSRIs), respectively, and queried

about prescribing of BELVIQ.

Contrave: Contrave is currently being further evaluated in a Cardiovascular Outcomes Trial

(CVOT), the LIGHT study, as a pre-approval requirement. In particular, across its clinical

development program, Contrave therapy has been associated with blood pressure elevations.

We specified patients at increased CV risk in asking about PCP’s comfort level in prescribing

Contrave.



The mean comfort level for 5 out of the 6 patient types we asked about ranged from 3.1 to 3.4.

Thus, our PCPs generally had fairly neutral comfort levels (with a trend toward less comfort) for

prescribing the respective agents in the patient types which highlighted specific safety

concerns. The highest level of discomfort was noted for prescribing Qsymia to women of child-

bearing age, with a mean 3.7 comfort level rating. This is not surprising, given that teratogenic

risk is a main focus of the current Qsymia REMS program.

Surveyed PCPs had generally neutral comfort levels with potential safety concerns

3.7

3.44

3.42

3.36

3.36

3.12

0 1 2 3 4 5

Prescribing Qsymia to women of child-bearing age

Prescribing Qsymia to patients at increased CV risk

Prescribing Contrave to patients at increased CV risk

Prescribing Belviq to patients taking SSRIs

Prescribing Belviq to patients at increased CV risk

Prescribing Belviq to patients with increased malignancy risk

Level of comfort around the following factors pertaining to use of anti-obesity agents on a scale of 1-5 (1=very comfortable, 5=not comfortable)


While the obesity pharmacotherapy space has had a very difficult history from a safety

standpoint, when looking at these data and in combination with the answer to the previous

question on safety, in which for 80% of our surveyed PCPs, safety and tolerability concerns

would not prevent clinical use of various weight-loss drugs, our conclusion from this specific

survey would have to be that the safety profiles of the new anti-obesity therapies would not

present major barriers to physician uptake among PCPs.

Cost is an issue that has to be dealt with, according to our PCPs

In order to identify the most significant potential barrier to widespread adoption of Qsymia,

BELVIQ, and eventually Contrave, we asked our PCPs to choose one reason from the

following: 1) safety/tolerability concerns; 2) cost/lack of reimbursement; 3) patient

disappointment with lack of efficacy and consequent lack of motivation; 4) competition from off-

label use of generic phentermine/topiramate and bupropion/naltrexone; 5) no major hurdles

preventing widespread prescribing; 6) other issues. The most commonly identified hurdle to

adoption was cost or lack of reimbursement, chosen by 54% of respondents. Not too

surprisingly, the second most commonly identified issue was safety, selected by 30% of the

PCPs in our survey.

Regarding other adoption hurdles, only a minority (10%) indicated patient disappointment from

lack of efficacy; 4% of our physicians felt that there would not be any substantial impediments

to prescribing these therapies, 2% (i.e. one physician) selected competition from off-label use



of generic components of the branded products (Qsymia and Contrave), and none of the

physicians in our survey selected reasons other than those listed.

In our survey, PCPs selected cost/lack of reimbursement as most significant hurdle to adoption of new weight-loss drugs

30%

54%

10%

2%

4%

0%

In my view, the biggest hurdle to Qsymia, Belviq, and Contrave’s wide adoption will be:

Concerns over safety and/or tolerability

Cost/lack of reimbursement

Patient disappointment with the small amountof weight loss and the resulting lack ofmotivation to continue treatment

Competition from off-label use of genericphentermine/topiramate andbupropion/naltrexone

I don’t expect any big hurdles; I think Qsymia, Belviq, and Contrave will be widely prescribed

Other hurdles


With third-party payers historically reluctant to pay for obesity pharmacotherapy, lack of

reimbursement for obesity drugs has been a common issue, until the progress achieved

recently. We polled our PCPs on their expectations for insurance coverage of the approved

agents Qsymia and BELVIQ in the future, two to three years following their market entries,

asking them to estimate what percentage of insurers will provide prescription coverage. Most

of our physicians were not optimistic about the prospects for coverage of these drugs. Only

20% of the group believed that ≥ 50% of insurers would cover obesity drugs in that time frame.

In fact, a 62% majority of PCPs in our survey forecasted that less than 30% of insurance

companies would reimburse these drugs approximately 2-3 years after their launches.

Majority of surveyed PCPs pessimistic about insurance coverage

24%

20%

18%

16%

2%

14%

0%

2%

0%

4%

0%

0% 5% 10% 15% 20% 25% 30%

Less than 10%

10-19%

20-29%

30-39%

40-49%

50-59%

60-69%

70-79%

80-89%

90-99%

100%

What percentage of insurers do you expect will cover Qsymia and Belviq approximately 2-3 years after their launch:




PCPs appear willing to use generics off-label...

Given potential patient concerns about the costs associated with new obesity treatments, we

surveyed our PCPs regarding the possibility of prescribing the individual drugs that make up a

drug combination, in the cases with generic availability. In this question, we focused on Qsymia

and Contrave, both of which are combinations of individual drugs with generic availability, and

framed our question in terms of a patient request derived from cost concern. Querying our

PCPs on their willingness to potentially use generic combinations of phentermine/topiramate or

bupropion/naltrexone in such a scenario, we noted that a 3:1 majority (76%) was amenable to

this type of substitution for the branded products.

In our survey, PCPs appear very willing to use the individual generic drugs instead of the branded ones

76%

24%

For a motivated patient concerned about drug cost and asking for treatment with generic phentermine/topiramate or bupropion/naltrexone:

Yes, I will prescribe the genericcombination

No, I will not prescribe the generic combination because….


...but this answer possibly contradicts an earlier answer.

We note that our PCPs’ apparent willingness to use off-label generics could be viewed as

contradictory to their prior answer to the question on what they view as the biggest hurdle to

these drugs’ adoption, since only one of our 50 respondents had indicated that competition

from these types of ―generic substitutions‖ might interfere with adoption of the branded

products. One possible explanation to this apparent contradiction could be that PCPs would

not expect many patients to request two separate prescriptions for the two generics, and thus

would not consider this a major hurdle to branded drug adoption.

We next asked physicians who answered that they would not prescribe the two individual

generics instead of the branded drug to elaborate on why not. Most reasons given were related



to concerns about dosing equivalence and off-label prescribing, as we would expect. We have

provided the answers we received to this question in the next table.

Surveyed PCPs unwilling to use generics cite off-label and equivalence concerns

PCP Reasons for Not Using Generics

• I don't prescribe phentermine; I also suspect the 2 meds separate will still be expensive anyway

• It's not approved

• Dosages may be different

• Not FDA approved

• Not clear on the long-term side-effects of these combination products

• To my knowledge, the generic phentermine does not come in the equivalent dose alone

• Dosing/strength

• The studies showing safety and efficacy were done with the combination [branded product]




#2) The Obesity Specialist Survey Results

In order to gain further perspective on the treatment of obesity using this new generation of

pharmacotherapies from a group of physicians that exclusively treat obesity, we conducted a

second survey and limited participation to physicians who are obesity specialists. All survey

participants were current prescribers of anti-obesity pharmacotherapies in their clinical

practices.

Two thirds of obesity specialists view Qsymia as the most efficacious agent

By a very wide margin, 68% vs. 4% for the next highest drug, our specialists selected Qsymia

as the drug resulting in the greatest weight loss. Notably, none of the obesity specialists we

surveyed selected BELVIQ. All other agents on our list received a very small number of votes,

ranging from 2% to 4%. Thus, it is very clear that among this specialist group of prescribers,

Qsymia is considered to be, by far, the most efficacious agent.

In our survey, most obesity specialists consider Qsymia as the most efficacious agent

68%

0%4% 4% 4% 2%

18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Qsymia Belviq Contrave Liraglutide Empatic Orlistat None of thesedrugs result inwhat I consider

meaningful weightloss

The obesity drug that results in the most robust weight loss is:

Source: Cowen and Company, SurveyMonkey

We further asked our specialists to predict the relative market share of the two newly approved

weight-loss agents, Qsymia and BELVIQ, in order to further gauge perceptions on relative

efficacy and measure relative potential utilization. When asked to project to 18-24 months after

their launches, 3/4 of our specialists (74%) viewed Qsymia as the dominant drug in the market

over BELVIQ, with 60% or greater share. In addition, only 4% of the respondents in our survey

selected BELVIQ as the market leader over Qsymia, with 60% or higher market share. Finally,

22% of the physicians we surveyed projected a 50-50 split between the two agents.



74% of obesity specialists pick Qsymia to be the market leader; only 4% pick BELVIQ

4%

36%

34%

22%

2%

2%

0%

0% 5% 10% 15% 20% 25% 30% 35% 40%








18-24 months after their launch, I believe that Qsymia and Belviq will have split the market in the following way:


While our specialists were clearly not impressed with the weight-loss efficacy of BELVIQ, it is

worth examining whether they may view it as a safer replacement for fenfluramine. Given the

notorious history of the fenfluramine-phentermine combination, the popular and effective ―Fen-

phen,‖ eventually withdrawn from the market because of cardiac valvulopathy risk, and the

greater serotonin receptor selectivity of BELVIQ, some clinicians may view one potential use of

BELVIQ to be in combination with phentermine. We asked our specialists about their possible

use of this combination. Only one fourth of the obesity specialists in our survey answered that

they would use the BELVIQ-Phentermine combination right now. The remaining three fourths

stated that they would not utilize it, most often (54%) because of lack of clinical trial data,

with the next most common reason (14%) being lack of FDA approval for this combination. It is

therefore clear that, until clinical trial data and/or FDA approval of this combination, the vast

majority of obesity specialists would be unwilling to use this potentially promising combination

off-label.

Majority of specialists in our survey would not use BELVIQ-Phentermine now

26%

6%

54%

14%

0%

10%

20%

30%

40%

50%

60%

Yes No, I don’t believe the addition of phentermine can significantly

add to the weight loss seen with Belviq alone

No, because we have not yetseen clinical trial data with the

Belviq + phenterminecombination

No, because the combination isnot FDA-approved

I would be willing to treat my patients with Belviq in combination with phentermine to help them achieve more robust weight loss:




Specialists are open to trying multiple agents…but it seems like Qsymia will get

the first script

Not surprisingly, the majority of our obesity specialists believe in the use of pharmacotherapy

for the treatment of obesity. In our earlier question concerning the most efficacious obesity

therapy, only 9 respondents (18%) stated than none of the listed drugs result in meaningful

weight loss. Despite their clear distinction of Qsymia as the most efficacious anti-obesity

therapy, most of our specialists appear willing to embrace multiple options. We asked our

physicians about how they might use Qsymia and BELVIQ in practice. Half of the group

indicated willingness to try both agents in sequence, should a patient lack response to the first

agent, without specifying which agent would be used upfront. Still, Qsymia seems to be the

agent of choice, when a drug is selected by name: 38% expect to use Qsymia first, while only

6% expect to start first with BELVIQ. Finally, a 10% minority of specialists expected to utilize

only one agent, and only 4% indicated that neither drug would be used.

Vast majority of surveyed specialists expect to use both Qsymia and BELVIQ…but Qsymia is the preferred agent when docs do select one

30%

6%

8%

0%

50%

2%

4%

0% 10% 20% 30% 40% 50% 60%

I will try Qsymia first, if the patient doesn’t respond, I will then try Belviq

I will try Belviq first, if the patient doesn’t respond, I will then try Qsymia

I will try Qsymia first, if the patient doesn’t respond, I won’t try Belviq

I will try Belviq first, if the patient doesn’t respond, I won’t try Qsymia

I will try one of the two first, if the patient doesn’t respond, I will then try the other one

I will try one of the two first, if the patient doesn’t respond, I won’t try the other one

I won’t use either of these drugs

The following statement best describes my expectation for my use of Qsymia and Belviq:


We further polled our specialists about their views on two drugs under investigation for obesity

treatment, Novo Nordisk’s injectable GLP-1 receptor agonist Victoza (liraglutide), already

approved for the treatment of Type 2 diabetes in the EU and the US, and Orexigen’s Empatic

(bupropion/zonisamide). Concerning both agents, the physicians in our survey tended to have

a fairly positive outlook. The majority of respondents for questions on both agents (76% and

66%, respectively) considered the drugs to be either incremental improvements compared to

currently available therapies, or very promising anti-obesity agents. For both drugs, 20% of

respondents voted that they had low expectations for these agents. In Victoza’s case, a third of

respondents (32%) viewed the drug as very promising, while 44% viewed it as an incremental

improvement over existing therapies.



Specialists view Victoza as “very promising” (32%) or as “incremental” (44%)

32%

44%

20%

4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

A very promising anti-obesityagent

An incremental improvementover currently available

therapies

I have very low expectationsfor this agent

I don’t have an opinion

What is your view of Novo Nordisk’s Victoza (liraglutide), which is already approved for diabetes and is currently in Phase III development for the

treatment of obesity?


In Empatic’s case, a fourth of respondents (26%) viewed the drug as very promising, while

40% viewed it as an incremental improvement over existing therapies. When looking at the

survey results for these two agents, it is worth remembering a number of differences, including

that 1) Victoza has already produced Phase III data, while Empatic has only been tested in two

Phase II studies, 2) Victoza is an injectable, while Empatic is an oral, and 3) physicians have

clinical experience with Victoza, since it has been on the US market since its 2009 approval for

diabetes, while Empatic is still an investigational agent, which may partially account for the

lower percentage of votes for it as a ―very promising‖ agent, compared with Victoza. On the

other hand, even if a physician in our survey was not familiar with the Empatic Phase II

dataset, Empatic’s individual drug components, bupropion and zonisamide, are used by US

physicians, (bupropion a lot more often than zonisamide, of course), and thus the idea of using

that drug combination should not be completely unfamiliar to obesity specialists.

Specialists view Empatic as “very promising” (26%) or as “incremental” (40%)

26%

40%

20%

14%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

A very promising anti-obesityagent

An incremental improvementover currently available

therapies

I have very low expectationsfor this agent

I don’t have an opinion

What is your view of Orexigen’s Empatic (buprorion/zonisamide) which was tested in two Phase II trials for the treatment of obesity?




Focusing on more near-term development, we asked our obesity specialists to evaluate a

future market with availability of Qsymia, BELVIQ, and an approved Contrave, in order to

project respective market shares for these products. The answers to this question, once again,

pointed to two conclusions: 1) physicians will utilize more than one of these anti-obesity

agents, and 2) Qsymia seems, once again, to be the agent of choice. Here is a summary of the

data:

90% of the votes went to scenarios in which there is room for all three drugs to gain

at least 20% market share; only 10% of the physicians voted for the scenario that

one drug (in that case, it was Qsymia) gains 80% market share, while the other two

have only 10% each. All other votes went to scenarios in which there is a dominant

player (40-60% market share), but there was 40-60% of the market left for the other

two, indicating that physicians believe that the market will accommodate multiple

drugs.

40% of the votes went to scenarios in which Qsymia is the dominant drug in the

market, i.e. having 80% market share (10% of the vote) or 60% market share (30%

of the vote).

The corresponding scenarios for BELVIQ and Contrave only received 4% of the

votes each.

In addition, 54% of the votes went to scenarios in which Qsymia would get 40% or

higher market share.

The corresponding scenarios for BELVIQ and Contrave received 6% and 24% of the

votes, respectively.

Eight out of the fifty respondents (16%) indicated that the market would be split

equally among the three drugs.



Surveyed specialists expect use of Qsymia, BELVIQ, and Contrave in the market

16%

14%

2%

20%

30%

4%

4%

10%

0%

0%

0% 5% 10% 15% 20% 25% 30% 35%



Belviq 40%, Contrave 40%, Qsymia 20%








Assuming Contrave is approved, 18-24 months from its launch, I believe the obesity drug market will be split in the following way:


Another way to look at these data is that more than one-third of the respondents forecasted a

market with two agents having equal lead shares of 40% each, most often with Qsymia being

one of the two leaders (34% of votes). Otherwise, the most votes (30%) were allocated to a

scenario with Qsymia holding 60% of the market and the two other agents dividing the

remaining share equally. With these market allocations, physicians in our survey have

accounted for some degree of utilization of all three agents, albeit often disproportionate. We

believe our specialists are recognizing the heterogeneous nature of obesity and considering

the potential variability of therapeutic responses with different drugs in individual patients.

These results reiterate for us that 1) Qsymia seems to be the dominant drug in the space, and

2) there is indeed room for multiple anti-obesity agents in clinical practice.

Specialists seem comfortable dealing with these drugs’ potential safety issues

We asked our specialists to select the obesity agent with the best safety and tolerability profile.

The results did not distinguish any one specific agent as the safest, and votes were almost

evenly distributed among currently approved obesity agents and liraglutide, which is approved

for Type 2 diabetes treatment. We believe this fairly uniform split in votes demonstrates that

our physicians recognize potential safety issues with all the weight-loss therapies which they

may use. Notably, only 3 out of the 50 respondents (6%) indicated that safety concerns

associated with these agents would prevent their clinical use. Clearly, the vast majority of

obesity specialists in our survey seem comfortable with management of any potential safety or

tolerability issues, and have concluded that the benefits provided by these therapies outweigh

possible risks.



Specialists in our survey did not distinguish any one weight-loss drug as the safest

20%22%

10%

24%

0%

18%

6%

0%

5%

10%

15%

20%

25%

30%

Qsymia Belviq Contrave Liraglutide Empatic Orlistat I believe that thesafety and tolerability

profile of theseagents is such that Iwould probably notuse them in most of

my patients

The obesity drug with the best safety and tolerability profile is:


In our survey, we took the opportunity to gain insight into our obesity specialists’ perspectives

on specific safety concerns that have been associated with the approved agents Qsymia and

BELVIQ. We referred to these concerns and rated comfort with prescribing of a particular

agent in a clinical scenario, according to four levels: 1) very comfortable; 2) comfortable, but

with precautions; 3) somewhat comfortable, limiting prescribing to a small group of patients;

and 4) not comfortable, with no prescribing.

For Qsymia, we asked about prescribing to women of child-bearing age and to patients at

increased cardiovascular risk, in order to elicit reactions to the risks of teratogenicity and

elevated heart rate, respectively. In both Qsymia scenarios, the majority of our respondents

(66% with regard to teratogenic risk and 62% for CV risk) rated themselves in one of the two

highest comfort levels.

Specialists comfortable prescribing Qsymia to younger women

12%

54%

26%

8%

0%

10%

20%

30%

40%

50%

60%

Very comfortable, I trust my patients to not take Qsymia

once they realize they’re pregnant

Comfortable, but I wouldclosely monitor and remind

the patient every month

Somewhat comfortable, Iwould only prescribe it to a

small fraction of these patients

Not comfortable, I would notprescribe Qsymia to women of

child-bearing age

How comfortable would you be prescribing Qsymia to women of child-bearing age?




Specialists comfortable prescribing Qsymia to CV risk patients

26%

36%

22%

16%

0%5%

10%15%20%25%30%35%40%

Very comfortable Comfortable, but wouldclosely monitor and warn thepatient and would ask them todiscuss with their cardiologist

before or after starting onQsymia

Somewhat comfortable, Iwould only prescribe it in a

small fraction of thesepatients

Not comfortable, I would notprescribe to this group of

patients

How comfortable would you be prescribing Qsymia to patients at increased CV risk?


For BELVIQ, we queried on prescribing to patients taking SSRIs and to patients at increased

cardiovascular risk, referring to serotonergic risk/serotonin syndrome and cardiac valvulopathy,

respectively. In the case of patients taking SSRIs, 56% of our specialists indicated the two

lowest comfort levels for prescribing BELVIQ, with approximately one-third signifying intention

to limit prescribing for such patients, and about one-quarter not prescribing in this scenario.

Another approximately one-third of the group was comfortable prescribing BELVIQ to patients

taking SSRIs, with close monitoring and discussion. On the other hand, with regard to CV risk,

most physicians (64%) indicated the two highest comfort levels for prescribing BELVIQ in this

case.

Some discomfort prescribing BELVIQ to patients on SSRIs

12%

32%

32%

24%

0% 5% 10% 15% 20% 25% 30% 35%

Very comfortable, I don’t think this is an issue for Belviq

Comfortable, but I would closely monitor and warn the patient

Somewhat comfortable, I would only prescribe to a small fractionof these patients

Not comfortable, I would not prescribe Belviq to this group ofpatients

How comfortable would you be prescribing Belviq to patients taking SSRIs?




Specialists comfortable prescribing BELVIQ to patients with CV risk

36%

28% 28%

8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Very comfortable Comfortable, but would closelymonitor and warn the patient andwould ask them to discuss thiswith their cardiologist before or

after starting on Belviq

Somewhat comfortable, I wouldonly prescribe in a small fraction

of these patients

Not comfortable, I would notprescribe to this group of

patients

How comfortable would you be prescribing Belviq to patients at increased CV risk?


We also were interested in gauging reaction to signals of tumorigenicity and cardiac

valvulopathy in BELVIQ’s preclinical dataset. Our specialists were asked to rate their levels of

concern resulting from these data. 62% of physicians indicated some concern, but no

impediment to use of BELVIQ, based on risk-benefit assessment, with another 16% of the

group expressing no concern. Therefore, it appears that more than three fourths of our

physicians would not limit their use of BELVIQ based on these issues.

Most specialists not significantly concerned by BELVIQ preclinical safety signals

4%

18%

62%

16%

0%

10%

20%

30%

40%

50%

60%

70%

Very concerned, I will notprescribe Belviq to my patients

Concerned, and I will onlyprescribe Belviq to a small % of

my patients

Somewhat concerned, but therisk/reward makes sense to meand I will use Belviq in quite a

few of my patients

Not concerned at all, I’ll use Belviq to many of my patients

How concerned are you about the rat carcinogenicity and potential valvulopathy data observed in Belviq’s preclinical studies?


With respect to impressions of Contrave’s cardiovascular safety, we polled the obesity

specialist group on the probability of success for the Light Study, Contrave’s Cardiovascular

Outcomes Study (CVOT). The trial’s primary endpoint is time to the first confirmed occurrence

of major adverse cardiovascular events (MACE), defined as cardiovascular death, non-fatal

myocardial infarction, and non-fatal stroke. Ultimately, the goal of the study is to demonstrate

non-inferior CV safety of Contrave compared to placebo in patients with moderate CV risk.

Sixty-two percent of our specialists estimated the probability of success to be 50% or greater,



with most within this segment (40%) being very optimistic and indicating a 75% or greater

chance of success.

Majority of specialists in our survey predict ≥ 50% probability of success for Contrave’s CVOT

2%

20%

16%

22%

28%

12%

0%

5%

10%

15%

20%

25%

30%

10% 20% 30% 50% 75% 90+%

The probability that Contrave’s cardiovascular outcomes LIGHT trial succeeds is approximately:


Therefore, with the exception of serotonergic risk concerns regarding the use of BELVIQ in

patients taking SSRIs, most obesity specialists surveyed appear to have a relatively high

comfort level with possible safety issues of Qsymia and BELVIQ, as well as optimism about CV

safety with Contrave. Given these data, it appears that most obesity specialists are

comfortable with the safety profiles, and satisfied with the risk-benefit ratios, of these new anti-

obesity agents.

Obesity specialists see cost/reimbursement as the biggest issue for these

drugs

In order to better understand the potential barriers to adoption of Qsymia, BELVIQ, and

Contrave from the point of view of obesity specialists, we surveyed our physicians on the

issues which may prevent uptake for each of the three drugs individually. Only a small minority

of the group (2%-8% across the questions about the three agents) indicated that there would

be no potential hurdles to widespread prescribing for any of the drugs. In the case of each new

anti-obesity agent, the greatest number of respondents (56% for Qsymia, 52% for BELVIQ,

and 48% for Contrave) voted for cost/lack of reimbursement as the primary issue preventing

wide adoption. This concern outweighed the others listed, including: 1) specific safety

concerns; 2) competition from the other new anti-obesity agents; 3) lack of efficacy and

subsequent patient disappointment; and 4) competition from generic substitution, in the cases

of Qsymia and Contrave. For Qsymia, the next most identified barrier (20%) was competition

from off-label generic substitution, while for BELVIQ, competition from Qsymia was the second

greatest barrier (22%). In the case of Contrave, the next most identified barrier (18%) was

patient disappointment with amount of weight loss.



56% of specialists identify cost/lack of reimbursement as biggest hurdle to Qsymia’s wide adoption

6%

56%6%0%

2%

20%

10%

In my view, the biggest hurdle to Qsymia’s wide adoption will be:

I don’t expect any big hurdles; I think Qsymia will be very widely prescribed


Concerns about teratogenicity

Concerns about heart rate increase

Competition from Belviq

Competition from off-label use ofgeneric phentermine/topiramate

Patients won’t lose much weight, will be disappointed and discontinue treatment


52% of specialists identify cost/lack of reimbursement as biggest hurdle to BELVIQ’s wide adoption

8%

52%14%

0%

4%

22%

In my view, the biggest hurdle to Belviq’s wide adoption will be:

I don’t expect any big hurdles; I think Belviq will be very widely prescribed


Concerns about valvulopathy

Concerns about tumorigenicity

Concerns about serotonin syndrome

Competition from Qsymia




48% of specialists identify cost/lack of reimbursement as biggest hurdle to Contrave’s wide adoption

2%

48%

12%0%

12%

8%

18%

Assuming it is approved, the biggest hurdle to Contrave’s wide adoption will be:

I don’t expect any big hurdles; I think Contrave will be very widely prescribed


Competition from Qsymia

Competition from Belviq

Competition from off-label use ofbupropion and naltrexone

Safety concerns


We also asked our specialists about their expectations for future insurance coverage of

Qsymia and BELVIQ. One-third of the specialists we surveyed predicted that half of all insurers

would provide prescription coverage for these drugs, while another 18% was even more

optimistic, expecting 70% or higher coverage. However, almost 50% of our specialists

expected only one-third or less of insurers to reimburse these drugs.

Our specialists slightly pessimistic about future insurance coverage

16.0%14.0%

18.0%

34.0%

8.0%6.0%

4.0%

0%

5%

10%

15%

20%

25%

30%

35%

40%

10% 20% 33% 50% 70% 85% 100%

I believe that 2-3 years after their launch, _____ of insurers will cover Qsymia and Belviq:




In light of the potential cost and reimbursement issues associated with new weight-loss drugs,

we set out to assess our specialists’ perspectives on substituting the branded drug with its

individual components, which are available as generics, focusing on Qsymia and Contrave. We

asked about their willingness to use generic phentermine/topiramate or bupropion/naltrexone,

in the context of patient requests driven by cost concerns. Respondents unwilling to prescribe

generic combinations indicated whether legal liability issues or concerns about accurate

generic titration motivated this decision. In both the Qsymia and Contrave scenarios, the

majority of respondents, 58% and 54%, respectively, indicated willingness to utilize the off-

label generic combinations. A higher proportion of specialists had legal liability concerns with

generic substitution for Contrave (30%) compared to Qsymia (20%). This difference may result

from the fact that phentermine is an approved weight-loss drug, although for short term use.

Most obesity specialists may likely have more experience using phentermine compared with

bupropion/naltrexone in the context of weight-loss therapy, and this may account for more

comfort, from a liability standpoint, using a phentermine-based generic combination. More

physicians were concerned about the accuracy of generic titration and subsequent

efficacy/tolerability effects with generic replacement of Qsymia (22%) compared to Contrave

(16%).

More than half the specialists in our survey willing to use the individual generic components of Qsymia

More than half the specialists in our survey willing to use the individual generic components of Contrave

58.0%

20.0% 22.0%

0%

10%

20%

30%

40%

50%

60%

70%

OK, will do it No, I’m afraid I can’t, due to the legal liability of using these two generics

off-label when there’s a branded drug on the market

No, I’m afraid I can’t, it’s too complicated to accurately titrate the two generics and still get the same efficacy and tolerability that you’d

get with Qsymia

To a motivated patient that I think could benefit from Qsymia, but could not afford it and would ask if I could “please help them” by prescribing

generic phentermine and topiramate instead, my answer would be:

54.0%

30.0%

16.0%

0%

10%

20%

30%

40%

50%

60%

OK, will do it No, I’m afraid I can’t, due to the legal liability of using these two generics

off-label when there’s a branded drug on the market

No, I’m afraid I can’t, because it’s too complicated to accurately titrate

the two generics and still get the same efficacy and tolerability that

you’d get with Contrave

To a motivated patient that I think could benefit from Contrave (when/if it is approved), but could not afford it and would ask if I could “please help them” by prescribing generic bupropion and naltrexone instead, my answer would

be:

Source: Cowen and Company, SurveyMonkey Source: Cowen and Company, SurveyMonkey

PCPs & Obesity Specialists Aligned on Key Conclusions

Through our two surveys, we have gained insights on the evolving obesity therapeutics market

from two separate physician groups, each of which manages obese and overweight patients.

Overall, we have found that the perspectives of PCPs and obesity specialists on weight-loss

drugs tend to be aligned. There were no material disagreements between these physician

groups with respect to our key findings:

1. Qsymia has the best efficacy and is expected to be used widely. PCPs may

have had less hands-on experience with Qsymia and its individual components pre-



approval in clinical practice, but both groups consider Qsymia to produce the most

robust weight loss and project Qsymia to be the obesity pharmacotherapy market

leader. Obesity specialists are even more positive about Qsymia than PCPs.

2. There is room for multiple weight-loss drugs in clinical practice. PCPs and

obesity specialists are very aligned on the fact that one treatment does not fit all

obese patients. Assuming Contrave approval, they agree that Qsymia, BELVIQ, and

Contrave will all be used to some extent for obesity treatment.

3. Safety concerns will not significantly prevent use of anti-obesity agents.

Obesity specialists are generally more comfortable with the specific safety issues

that may be associated with these drugs. However, both groups do not consider

safety to be the major barrier preventing utilization of these therapies.

4. Drug cost and lack of reimbursement are viewed as the major barriers to

adoption. PCPs and obesity specialists identify therapy cost concerns and lack of

insurance coverage as the primary hurdles to widespread uptake of anti-obesity

drugs. Both groups appear relatively willing to use the individual generic components

of branded drugs off-label in order to help patients with cost concerns. Interestingly,

and somewhat surprisingly, PCPs appear even more willing than specialists to

prescribe such generic replacements.



Cowen and Company PCP Obesity Survey Questionnaire n=50 for all questions

1. How many patients have you treated with Qsymia since it became commercially available in September 2012?

1. None (62%) 2. 1-5 (28%) 3. 6-10 (6%) 4. 11-15 (0%) 5. 16-20 (4%) 6. 21-30 (0%) 7. 31-49 (0%) 8. >50 (0%)

2. One year after BELVIQ’s launch, I would expect that Qsymia and BELVIQ will have split the anti-obesity market in the

following way: 1. Qsymia 90%, BELVIQ 10% (10%) 2. Qsymia 75%, BELVIQ 25% (28%) 3. Qsymia 60%, BELVIQ 40% (24%) 4. Qsymia 50%, BELVIQ 50% (28%) 5. Qsymia 40%, BELVIQ 60% (2%) 6. Qsymia 25%, BELVIQ 75% (8%) 7. Qsymia 10%, BELVIQ 90% (0%)

3. In my opinion, the anti-obesity drug that results in the most robust weight loss is: 1. Qsymia (52%) 2. BELVIQ (12%) 3. Contrave (0%) 4. Liraglutide (2%) 5. Empatic (0%) 6. Orlistat (2%) 7. Phentermine (18%) 8. Other (2%) 9. None of these drugs result in what I consider to be meaningful weight loss (12%)

4. The obesity drug with the cleanest safety and tolerability profile is:

1. Qsymia (16%) 2. BELVIQ (16%) 3. Contrave (0%) 4. Liraglutide (4%) 5. Empatic (0%) 6. Orlistat (20%) 7. Phentermine (22%) 8. Other (2%) 9. I believe that the safety and tolerability profile of these agents would likely prevent me from using them in most of

my patients (20%)

5. How long would you expect the average Qsymia and BELVIQ patient to remain on therapy?

1. 0-2 months (2%) 2. 3-4 months (20%) 3. 5-6 months (4%) 4. 7-9 months (4%) 5. 10-12 months (20%) 6. >12 months (18%) 7. Other (0%)



6. Please rate your level of comfort around the following factors pertaining to your use of anti-obesity agents on a scale of 1-5 (1=very comfortable, 5=not comfortable)

1. Prescribing Qsymia to women of child-bearing age (mean 3.7) 2. Prescribing Qsymia to patients at increased CV risk (mean 3.44) 3. Prescribing BELVIQ to patients taking SSRIs (mean 3.36) 4. Prescribing BELVIQ to patients at increased CV risk (mean 3.36) 5. Prescribing BELVIQ to patients with increased malignancy risk (mean 3.12) 6. Prescribing Contrave to patients at increased CV risk (mean 3.42)

7. For a motivated patient who may benefit from Qsymia or Contrave but is concerned about drug cost and is asking for treatment with generic phentermine/topiramate or bupropion/naltrexone instead, my answer would be:

1. Yes, I will prescribe the generic combination (76%)

2. No, I will not prescribe the generic combination because…. (24%) Please provide your reasoning

8. In my view, the biggest hurdle to Qsymia, BELVIQ, and Contrave’s wide adoption will be:

1. Concerns over safety and/or tolerability (30%) 2. Cost/lack of reimbursement (54%) 3. Patient disappointment with the small amount of weight loss and the resulting lack of motivation to continue

treatment (10%) 4. Competition from off-label use of generic phentermine/topiramate and bupropion/naltrexone (2%) 5. I don’t expect any big hurdles; I think Qsymia, BELVIQ, and Contrave will be widely prescribed (4%) 6. Other hurdles (0%)

9. Assuming Contrave is approved, 18-24 months from its launch, I believe the obesity drug market will be split in the

following way: 1. Qsymia 80%, BELVIQ 10%, Contrave 10% (18%) 2. BELVIQ 80%, Qsymia 10%, Contrave 10% (4%) 3. Contrave 80%, Qsymia 10%, BELVIQ 10% (2%) 4. Qsymia 60%, BELVIQ 20%, Contrave 20% (20%) 5. BELVIQ 60%, Qsymia 20%, Contrave 20% (6%) 6. Contrave 60%, Qsymia 20%, BELVIQ 20% (2%) 7. Qsymia 40%, BELVIQ 40%, Contrave 20% (16%) 8. BELVIQ 40%, Contrave 40%, Qsymia 20% (8%) 9. Contrave 40%, Qsymia 40%, BELVIQ 20% (10%) 10. Qsymia 33%, BELVIQ 33%, Contrave 33% (12%) 11. Other market split (2%)

10. What percentage of insurers do you expect will cover Qsymia and BELVIQ approximately 2-3 years after their

launch:

1. Less than 10% (24%) 2. 10-19% (20%) 3. 20-29% (18%) 4. 30-39% (16%) 5. 40-49% (2%) 6. 50-59% (14%) 7. 60-69% (0%) 8. 70-79% (2%) 9. 80-89% (0%) 10. 90-99% (4%) 11. 100% (0%)



Cowen and Company Obesity Specialist Survey Questionnaire n=50 for all questions

1. I believe that 2-3 years after their launch, _____ of insurers will cover Qsymia and BELVIQ:

1. 10% (16%)

2. 20% (14%)

3. 33% (18%)

4. 50% (34%)

5. 70% (8%)

6. 85% (6%)

7. 100% (4%)

2. In my view, the biggest hurdle to Qsymia’s wide adoption will be:

1. I don’t expect any big hurdles; I think Qsymia will be very widely prescribed (6%)

2. Cost/lack of reimbursement (56%)

3. Concerns about teratogenicity (6%)

4. Concerns about heart rate increase (0%)

5. Competition from BELVIQ (2%)

6. Competition from off-label use of generic phentermine/topiramate (20%)

7. Patients won’t lose much weight, will be disappointed and discontinue treatment (10%)

3. How comfortable would you be prescribing Qsymia to women of child-bearing age?

1. Very comfortable, I trust my patients to not take Qsymia once they realize they’re pregnant (12%)

2. Comfortable, but I would closely monitor and remind the patient every month (54%)

3. Somewhat comfortable, I would only prescribe it to a small fraction of these patients (26%)

4. Not comfortable, I would not prescribe Qsymia to women of child-bearing age (8%)

4. How comfortable would you be prescribing Qsymia to patients at increased CV risk?

1. Very comfortable (26%)

2. Comfortable, but would closely monitor and warn the patient and would ask them to discuss with their cardiologist

before or after starting on Qsymia (36%)

3. Somewhat comfortable, I would only prescribe it in a small fraction of these patients (22%)

4. Not comfortable, I would not prescribe to this group of patients (16%)

5. To a motivated patient that I think could benefit from Qsymia, but could not afford it and would ask if I could “please

help them” by prescribing generic phentermine and topiramate instead, my answer would be:

1. OK, will do it (58%)

2. No, I’m afraid I can’t, due to the legal liability of using these two generics off-label when there’s a branded drug on

the market (20%)

3. No, I’m afraid I can’t, it’s too complicated to accurately titrate the two generics and still get the same efficacy and

tolerability that you’d get with Qsymia (22%)

6. In my view, the biggest hurdle to BELVIQ’s wide adoption will be:

1. I don’t expect any big hurdles; I think BELVIQ will be very widely prescribed (8%)


3. Concerns about valvulopathy (14%)

4. Concerns about tumorigenicity (0%)

5. Concerns about serotonin syndrome (4%)

6. Competition from Qsymia (22%)

7. How comfortable would you be prescribing BELVIQ to patients taking SSRIs?

1. Very comfortable, I don’t think this is an issue for BELVIQ (12%)



2. Comfortable, but I would closely monitor and warn the patient (32%)

3. Somewhat comfortable, I would only prescribe to a small fraction of these patients (32%)

4. Not comfortable, I would not prescribe BELVIQ to this group of patients (24%)

8. How comfortable would you be prescribing BELVIQ to patients at increased CV risk?

1. Very comfortable (36%)

2. Comfortable, but would closely monitor and warn the patient and would ask them to discuss this with their

cardiologist before or after starting on BELVIQ (28%)

3. Somewhat comfortable, I would only prescribe in a small fraction of these patients (28%)

4. Not comfortable, I would not prescribe to this group of patients (8%)

9. How concerned are you about the rat carcinogenicity and potential valvulopathy data observed in BELVIQ’s

preclinical studies?

1. Very concerned, I will not prescribe BELVIQ to my patients (4%)

2. Concerned, and I will only prescribe BELVIQ to a small % of my patients (18%)

3. Somewhat concerned, but the risk/reward makes sense to me and I will use BELVIQ in quite a few of my patients

(62%)

4. Not concerned at all, I’ll use BELVIQ to many of my patients (16%)

10. I would be willing to treat my patients with BELVIQ in combination with phentermine to help them achieve more

robust weight loss:

1. Yes (26%)

2. No, I don’t believe the addition of phentermine can significantly add to the weight loss seen with BELVIQ alone (6%)

3. No, because we have not yet seen clinical trial data with the BELVIQ + phentermine combination (54%)

4. No, because the combination is not FDA-approved (14%)

11. The following statement best describes my expectation for my use of Qsymia and BELVIQ:

1. I will try Qsymia first, if the patient doesn’t respond, I will then try BELVIQ (30%)

2. I will try BELVIQ first, if the patient doesn’t respond, I will then try Qsymia (6%)

3. I will try Qsymia first, if the patient doesn’t respond, I won’t try BELVIQ (8%)

4. I will try BELVIQ first, if the patient doesn’t respond, I won’t try Qsymia (0%)

5. I will try one of the two first, if the patient doesn’t respond, I will then try the other one (50%)

6. I will try one of the two first, if the patient doesn’t respond, I won’t try the other one (2%)

7. I won’t use either of these drugs (4%)

12. 18-24 months after their launch, I believe that Qsymia and BELVIQ will have split the market in the following way:

1. Qsymia 90%, BELVIQ 10% (4%)

2. Qsymia 75%, BELVIQ 25% (36%)

3. Qsymia 60%, BELVIQ 40% (34%)

4. Qsymia 50%, BELVIQ 50% (22%)




13. The obesity drug that results in the most robust weight loss is:

1. Qsymia (68%)

2. BELVIQ (0%)

3. Contrave (4%)

4. Liraglutide (4%)

5. Empatic (4%)

6. Orlistat (2%)

7. None of these drugs result in what I consider meaningful weight loss (18%)



14. The obesity drug with the best safety and tolerability profile is:

1. Qsymia (20%)

2. BELVIQ (22%)

3. Contrave (10%)

4. Liraglutide (24%)

5. Empatic (0%)

6. Orlistat (18%)

7. I believe that the safety and tolerability profile of these agents is such that I would probably not use them in most of

my patients (6%)

15. The probability that Contrave’s cardiovascular outcomes LIGHT trial succeeds is approximately:

1. 10% (2%)

2. 20% (20%)

3. 30% (16%)

4. 50% (22%)

5. 75% (28%)

6. 90+% (12%)

16. Assuming it is approved, the biggest hurdle to Contrave’s wide adoption will be:

1. I don’t expect any big hurdles; I think Contrave will be very widely prescribed (2%)


3. Competition from Qsymia (12%)

4. Competition from BELVIQ (0%)

5. Competition from off-label use of bupropion and naltrexone (12%)

6. Safety concerns (8%)

7. Patients won’t lose much weight, will be disappointed and discontinue treatment (18%)

17. To a motivated patient that I think could benefit from Contrave (when/if it is approved), but could not afford it and

would ask if I could “please help them” by prescribing generic bupropion and naltrexone instead, my answer would be:

1. OK, will do it (54%)

2. No, I’m afraid I can’t, due to the legal liability of using these two generics off-label when there’s a branded drug on

the market (30%)

3. No, I’m afraid I can’t, because it’s too complicated to accurately titrate the two generics and still get the same

efficacy and tolerability that you’d get with Contrave (16%)

18. Assuming Contrave is approved, 18-24 months from its launch, I believe the obesity drug market will be split in the

following way:

1. Qsymia 33%, BELVIQ 33%, Contrave 33% (16%)


3. BELVIQ 40%, Contrave 40%, Qsymia 20% (2%)

4. Contrave 40%, Qsymia 40%, BELVIQ 20% (20%)


6. BELVIQ 60%, Qsymia 20%, Contrave 20% (4%)



9. BELVIQ 80%, Qsymia 10%, Contrave 10% (0%)


19. What is your view of Novo Nordisk’s Victoza (liraglutide), which is already approved for diabetes and is currently in

Phase III development for the treatment of obesity?



1. A very promising anti-obesity agent (32%)

2. An incremental improvement over currently available therapies (44%)

3. I have very low expectations for this agent (20%)

4. I don’t have an opinion (4%)

20. What is your view of Orexigen’s Empatic (buprorion/zonisamide) which was tested in two Phase II trials for the

treatment of obesity?

1. A very promising anti-obesity agent (26%)

2. An incremental improvement over currently available therapies (40%)

3. I have very low expectations for this agent (20%)

4. I don’t have an opinion (14%)



Valuation Methodology & Investment Risks

Valuation MethodologyBiotechnology:

In calculating our 12-month target price, we employ one or more valuation methodologies, which include a discounted earnings analysis, discountedcash flow analysis, net present value analysis and/or a comparable company analysis. These analyses may or may not require the use of objectivemeasures such as price-to-earnings or price-to-sales multiples as well as subjective measures such as discount rates.

We make investment recommendations on early stage (pre-commercial) biotechnology companies based upon an assessment of their technology,the probability of pipeline success, and the potential market opportunity in the event of success. However, because these companies lack traditionalfinancial metrics, we do not believe there are any good methodologies for assigning a specific target price to such stocks.

Investment RisksBiotechnology:

There are multiple risks that are inherent with an investment in the biotechnology sector. Beyond systemic risk, there is also clinical, regulatory, andcommercial risk. Additionally, biotechnology companies require significant amounts of capital in order to develop their clinical programs. The capital-raising environment is always changing and there is risk that necessary capital to complete development may not be readily available.

Company Specific Risks

Risks to our Market Perform rating on ARNA include: 1) significant changes in the uptake in BELVIQ scripts, 2) competitive pressure from Qsymia,3) positive (or negative) data from Orexigen's LIGHT CVOT, 4) change of EU regulatory plans for BELVIQ, and 5) acceleration of development plansand/or regulatory pathway news for combination product with phentermine.



AddendumSTOCKS MENTIONED IN IMPORTANT DISCLOSURESTicker Company Name

ARNA Arena PharmaceuticalsOREX Orexigen TherapeuticsVVUS Vivus

Analyst CertificationEach author of this research report hereby certifies that (i) the views expressed in the research report accurately reflect his or her personal views aboutany and all of the subject securities or issuers, and (ii) no part of his or her compensation was, is, or will be related, directly or indirectly, to the specificrecommendations or views expressed in this report.

Important DisclosuresCowen and Company, LLC and or its affiliates make a market in the stock of Arena Pharmaceuticals, Orexigen Therapeutics and Vivus securities.

Cowen and Company, LLC compensates research analysts for activities and services intended to benefit the firm's investor clients. Individualcompensation determinations for research analysts, including the author(s) of this report, are based on a variety of factors, including the overallprofitability of the firm and the total revenue derived from all sources, including revenues from investment banking. Cowen and Company, LLC doesnot compensate research analysts based on specific investment banking transactions.

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COWEN AND COMPANY RATING DEFINITIONSCowen and Company Rating System effective May 25, 2013Outperform (1): The stock is expected to achieve a total positive return of at least 15% over the next 12 monthsMarket Perform (2): The stock is expected to have a total return that falls between the parameters of an Outperform and Underperform over thenext 12 monthsUnderperform (3): Stock is expected to achieve a total negative return of at least 10% over the next 12 monthsAssumption: The expected total return calculation includes anticipated dividend yieldCowen and Company Rating System until May 25, 2013Outperform (1): Stock expected to outperform the S&P 500Neutral (2): Stock expected to perform in line with the S&P 500Underperform (3): Stock expected to underperform the S&P 500Assumptions: Time horizon is 12 months; S&P 500 is flat over forecast periodCowen Securities, formerly known as Dahlman Rose & Company, Rating System until May 25, 2013Buy – The fundamentals/valuations of the subject company are improving and the investment return is expected to be 5 to 15 percentage points higherthan the general market returnSell – The fundamentals/valuations of the subject company are deteriorating and the investment return is expected to be 5 to 15 percentage pointslower than the general market returnHold – The fundamentals/valuations of the subject company are neither improving nor deteriorating and the investment return is expected to be inline with the general market return

COWEN AND COMPANY RATING ALLOCATIONDistribution of Ratings/Investment Banking Services (IB) as of 09/30/13Rating Count Ratings Distribution Count IB Services/Past 12 MonthsBuy (a) 394 58.72% 54 13.71%Hold (b) 255 38.00% 5 1.96%Sell (c) 22 3.28% 1 4.55%

(a) Corresponds to "Outperform" rated stocks as defined in Cowen and Company, LLC's rating definitions. (b) Corresponds to "Market Perform" asdefined in Cowen and Company, LLC's ratings definitions. (c) Corresponds to "Underperform" as defined in Cowen and Company, LLC's ratingsdefinitions.Note: "Buy", "Hold" and "Sell" are not terms that Cowen and Company, LLC uses in its ratings system and should not be construed as investmentoptions. Rather, these ratings terms are used illustratively to comply with FINRA and NYSE regulations.



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