Arena Opening New Doors

| About: Arena Pharmaceuticals, (ARNA)

Arena Pharmaceuticals (NASDAQ:ARNA) is opening new doors that may pave the way for a better bottom line in years to come. While it is Arena's anti-obesity drug Belviq that drives the company and the stock price right now, new avenues and revenue streams are an integral part of a longer term growth strategy. Arena is creating just that with a new co-development deal regarding a treatment for myocardial infarction, acute coronary syndrome, stroke, peripheral artery disease, as well as other cardiovascular diseases.

Arena will be working with IIdong Pharmaceuticals, and the deal encompasses distribution and commercialization of the drug Temanogrel in South Korea. The deal is subject to further development and regulatory approval of the drug. IIdong will take on the responsibility of the Phase 1 trial as well as the Phase 2a Proof-Of-Concept trial. Arena will maintain ownership of Temanogrel outside of North Korea and have rights to the data gathered by IIdong testing. Arena received an initial milestone payment of $2 million from IIdong.

We will maintain ownership of temanogrel outside of South Korea, and have the rights to use data generated by Ildong for the development and potential commercialization of temanogrel outside of South Korea by us or other Arena licensees. In addition, Ildong has agreed to pay us a $2 million development milestone if the planned additional Phase 1 and Phase 2a clinical trials conducted by Ildong support continued development and we or another Arena licensee initiates a Phase 2b clinical trial of temanogrel. We are also eligible to receive a royalty on net sales of temanogrel in South Korea, while Ildong is eligible to receive a share of future payments received by us related to licensing transactions and sales of temanogrel in other territories.

Temanogrel is an inverse agonist of the serotonin 2A receptor intended for the treatment of thrombotic diseases, and has completed single- and multiple-ascending dose Phase 1 trials in healthy volunteers. Temanogrel has the potential to prevent serotonin-mediated platelet aggregation and reverse serotonin-mediated vasoconstriction. This dual mechanism of temanogrel may be therapeutically useful for the treatment or prevention of thrombotic diseases.

While this is all still in very early stages it demonstrates that Arena is not standing still and not placing its future solely in the hands of it anti-obesity drug Belviq. This bodes well for the company and is a testament to management for the ability to keep the proverbial ball rolling.

A deal like this does not carry an immediate impact on stock price, but can in the future if the drug is a success. Many investors in Arena have a laser-like focus on Belviq and they should. The potential market for a prescription anti-obesity drug is substantial. Arena is awaiting DEA scheduling of Belviq, which garnered FDA approval earlier this year, and was the first prescription drug for obesity that has been approved by the agency in over a decade. Competitor Vivus (NASDAQ:VVUS) also has an anti-obesity drug, Qsymnia, that launched in September. The earlier launch is attributable to the fact that the Vivus drug did not need DEA scheduling because it is a combination of two existing drugs.

Arena has been ranging in stock price between $13.50 upon FDA approval and about $8. Currently, the equity trades at $9.20. I anticipate that DEA scheduling will see the equity pop up to $11. The DEA has had the file on Belviq for a bit over 5 months now and typically the DEA process is a 4 to 6 month one. This implies that we could be just days or weeks away from DEA scheduling. A launch of Belviq should happen in the first quarter of 2013.

The news surrounding a new deal may not be the news investors are eagerly awaiting, but it is a positive step nonetheless. Stay tuned!

Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have no position in Vivus.