Arena Approaches 50% Institutional Ownership

Aug.15.13 | About: Arena Pharmaceuticals, (ARNA)

Arena Pharmaceuticals (NASDAQ:ARNA) is approaching 50% institutional ownership. The company currently sits just below the magic number at 49% according to data recently updated by Nasdaq, and through June 30th of this year. Because the data is trailing, the company could already be over the 50% mark. We will not know that for a few more months.

Institutions holding a stock is often seen as a sign that Wall Street is supportive of an equity. Arena, comparative to other players in the prescription anti-obesity space, has been dominated by retail investors for a few years now. Long-term retail holders are eager to see institutional activity increase, as it's these big players that can drive a stock.

Over the past year institutional activity in Arena has picked up. It was not that long ago that institutional ownership was in the 30% range. In the past 6 months the number has been creeping more slowly.

Arena Institutional Summary

Arena Institutional Ownership - Source NASDAQClick to enlarge

Nearly 2.5 million shares were added from institutional activity in the latest reporting period. A noticeable change occurred with Wellington Management, which increased its position by 2.5 million shares, bringing its share stake up to 24.8 million. Essentially, Wellington's move is responsible for the slight shift upward in Arena activity.

While getting above the 50% mark in institutional ownership would be viewed as a victory of sorts, the real victory will come when more players make a decision similar to Wellington without others selling out.

The other companies in the anti-obesity space, Vivus (NASDAQ:VVUS) and Orexigen (NASDAQ:OREX) enjoy more substantial institutional ownership levels, but had similar modest increases as well. Vivus carries institutional ownership at 81%, while Orexigen stands at 74%.

Vivus Institutional Summary

Vivus Institutional Ownership - Source NASDAQClick to enlarge

The top institutional player in Vivus is First Manhattan.

Orexigen Institutional Summary

Orexigen Institutional Summary - Source NASDAQClick to enlarge

The top institutional player in Orexigen is Capital Research Global

One interesting item to note is the top 10 institutions that are players in this space. There still exists a lot of overlap between the institutional players and their positions in these companies. One interesting dynamic to watch is how these positions might fluctuate. A substantial move by one of these players could be a hint that they see one of these companies taking a leadership role in the sector.

Overlap of Institutions

  • Vanguard Group has $90.9 million invested in Arena, $71.5 million in Vivus, and $16 million in Orexigen. The firm decreased ownership in Arena, increased ownership in Vivus, and decreased ownership in Orexigen
  • BlackRock Fund Advisors has $51.2 million invested in Arena, $47.5 million in Vivus, and $23.4 million in Orexigen. The firm increased positions in all three equities in the latest reporting.
  • Barclays Global Investors UK Holdings has $44.7 million in Arena, $35.8 million in Vivus, and $19.2 million in Orexigen. The firm increased positions in all three equities
  • State Street has invested $44.1 million in Arena, and $24.6 million in Orexigen. Investment positions in both equities increased in the last reporting.
  • FMR LLC carries a $32.5 million investment in Arena and a $26.8 million investment in Orexigen. The firm increased its position in both equities
  • First Manhattan, the company that now controls the board on Vivus has a substantial investment in competitor Orexigen. First Manhattan has $120.8 million invested in Vivus, and $44.3 million invested in Orexigen. In the most recent reporting First Manhattan increased its position in Vivus, and took no action on Orexigen

The bottom line here is that institutions still seem a bit cautious with a lean toward optimism. A lot will be playing out over the next 3 to 6 months with varying strategies being employed by each company. Arena has put Europe in the proverbial back seat at the moment with concentration in Asia, while Orexigen is already applying for European approval while additional testing plays out. Vivus is re-focusing on its U.S. launch, seeking a partner, and getting ready to give Europe another try. As these strategies play out, institutions will jockey positions in the space. It is clear that institutions have not yet declared a leader in the space, but rest assured, that day is coming.

Investors will want to watch the strategies of these companies develop as time passes to gauge whether any or all of these companies are progressing on their respective paths. For Arena investors the story is currently sales figures in the U.S. and progress on insurance coverage. 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 or Orexigen