Arena Pharmaceuticals, Inc.: With Belviq Approval, Now What?

In the pharmaceutical sector of the market, many eyes have been on Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) and its fierce competitor, Vivus, Inc. (NASDAQ:VVUS) in the battle over their new products in the obesity drug market.  Arena Pharmaceuticals, Inc., despite its Belviq getting FDA approval two weeks before Vivus’ Qsymia, isn’t expected to put its drug be on the market sooner than the rival.

The price of Arena Pharmaceuticals stock spiked upon the FDA news to a 52-week high, but this recent analysis suggests that darker days may be ahead if Arena doesn’t measure good efficacy of its drug once it hits the market. Its overall profitability has declined in recent quarters and with Vivus getting approval for its drug so soon – the first new obesity drugs introduced this millennium – the stock bump was short-lived, and questions remain as to whether Arena can get its act together.

This analysis from just last week provides some clues as to where Arena might be heading, as it is suggested in the wake of the Belviq approval that the company is now in a transition phase from a development company to a commercial company – once Belviq is on the market, that is – and thus will likely have to face different expectations – ones based on sales and results of the drug in the market, ratgher than on research, development and FDA approval. With some analysts suggesting that Vivus’ rival drug will be more effective than Belviq, there could be some extra pressure on Arena to come through big or risk irrelevance, as the company has invested so much money into Belviq and has gotten plenty of investor support over the years.

Some of that support came from hedge funds like Daniel Gold’s QVT Financial and D E Shaw. However, that support has eroded some in recent months. At the end of March, QVT was invested more than $10 million in Arena Pharmaceuticals stock, but it had sold off 26 percent of its position during the quarter. D E Shaw followed suit, jettisoning 27 percent of its holding during the quarter down to about $1.9 million.

Tuesday, ARNA stock closed at $9.72 per share, a drop of 2.26 percent, and was falling further after-hours.

Arena Pharmaceuticals, Inc., currently has a market cap of $1.9 billion and average daily trading volume of 12.1 million shares.