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Jacob Smith
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Attorney and long time investor. I became very interested in the stock market at age 12 when my grandparents started talking to me about their Microsoft stock. I found the whole thing fascinating. I have invested ever since. I was never interested in working as a money manager, however, as I... More
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  • Like The Transformers, There Is "More Than Meets The Eye" When It Comes To ARNA's Dramatic Move Upward The Last Two Trading Days

    Today shares of Arena Pharmaceuticals (NASDAQ:ARNA) moved up by more than 7% to close at $8.94 a share with a dramatic increase in volume, 14,237,072, which is about 3 times the average volume for ARNA of 5,360,293 (NASDAQ.com). But what was behind this move?

    Some, myself included, did predict that ARNA shares would slowly gravitate towards $9 per share right before the Belviq launch as speculators purely interested in a possible sales surprise got on board. However, not many of us expected such a dramatic move so soon, especially considering the apparent lack of interest in ARNA shares even weeks after final DEA scheduling was released.

    It is pretty clear that retail was not behind this move up due to volume being nearly 3 times average. One thesis states that many of the 60 million shares currently being sold short are now being covered.

    However, some are positing that this current move up was not short covering at all and that the volume increase was completely the result of higher demand for ARNA shares. If that is the case, that leaves us with one option: Institutional buying has increased.

    If institutional buying has indeed markedly increased, then something is going on here that most investors are not yet aware of. How do I come to this conclusion? Plain and simple logic.

    Nothing has changed since the DEA gave its go-ahead for Arena and Eisai to begin selling Belviq. In fact, not one piece of new news has been released since Arena management spoke about Arena at the BOA/Merrill Lynch symposium on May 15, 2013. For Institutional buying to increase enough to send ARNA over 7% higher in one day when the same institutions had the opportunity to buy the same shares with the same news for the last 3 weeks for around $8 a share but passed and are now willing to pay up to $8.94 a share defies logic. The mere fact that we are closer to the Belviq launch could not serve as enough of a catalyst to make the shares almost an entire dollar more valuable to institutions when they passed on the same shares just last Thursday at much lower prices.

    Possible catalysts for today's move include a yet to be leaked buyout offer, a leak that sales will be higher than first expected, or merely institutional research that shows a risk to benefit ratio far exceeding the value of ARNA at $8 a share.

    Whatever it is, there is more to this current run up than meets the eye. Something is driving this buying outside of just the run up many of us expected and I predict we will be hearing more information about this reason before Belviq launches on June 7th.

    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.

    Tags: ARNA, long-ideas
    May 29 8:38 AM | Link | Comment!
  • Is Arena's Management Finally Becoming Bolder In Promoting Belviq?

    about:ARNA

    Arena Pharmaceuticals (NASDAQ:ARNA) shareholders have been through a lot over the past year, including having to wait an excruciating amount of time for the DEA to allow ARNA to begin selling its novel weight loss drug, Belviq, and a withdrawn application to the EU. Most puzzling and maybe even more painful has been an apparent lack of enthusiasm from management for promoting Belviq that, when compared to its competitor Vivus' (VVUS) promotion of its weight loss drug Qsymia, has seemed lackluster at best.

    ARNA shareholders have been railing for months against management's refusal to engage in more aggressive promotion of the company and the great potential of Belviq. Defenders of CEO Jack Lief state that his extremely cautious "wait-and-see" approach is the right way to handle the situation and that Belviq "will sell itself because it is such a revolutionary and exceptional drug." Whether Mr. Lief is overly concerned about accidentally overpromising or is merely not a great promoter, his words and inaction have certainly depressed ARNA's stock price in the short term.

    The converse is true over at Vivus headquarters. Management at VVUS, along with the help of its many investors on Wall Street, have performed a miracle of sorts on the price of its equity. VVUS has been through lackluster sales of Qsymia, a shareholder mutiny from a large institutional investor seeking change in leadership, an apparent failure to find a partner to team up with, and a disastrous financial meltdown that threatens to possibly bankrupt the company unless something changes very soon. Yet, VVUS's stock is outperforming ARNA.

    The Good News for ARNA Investors

    ARNA management finally seems to be realizing how important it is for money managers to see that a stock's executives are confident enough in the company's products to show some excitement about the company's prospects going forward. The first sign of a possible change in strategy life I have seen with ARNA's typically cautious management team was on May 10th at the Bank Of America/Merrill Lynch Health Care Conference.

    Instead of the usual "stay tuned/we are optimistic for the future of Belviq" type cliche's usually given by management, Senior VP of Operations, Craig Audet, and CFO Robert Hoffman, aggressively went on the offensive for the first time in recent memory.

    Some choice quotes from the presentation include the following (emphasis added with italics on the words I feel demonstrate the aggression and passion that might be pointing to a new strategic approach at Arena):

    - "Eisai is 100% ready to go. They built a market for Aricept that did not exist at the time. So they have a great deal of experience in building markets, in organizing markets, and driving sales."

    - "Another thing they (Eisai) are focused on doing, and they are black belts at, is reimbursement. They cut their teeth on Aricept and had tremendous success and we expect the same for Belviq."

    -"If we hit $250 million…I mean when we hit $250 million in sales..."

    - "We have had a lot of interest in the Pacific Rim region and there is tremendous opportunity as China has a larger obese population than the U."

    - On the possibility of a Belviq/Phentermine combination drug (BelPhen): "We have always said that a combination approach is a priority for us so we expect to get that FDA feedback and then act on it very quickly. (States hopefully by the end of the year).

    Has there been a change in management's approach when it comes to addressing the public about Belviq? We will certainly find out soon as Belviq launches in just a few short weeks.

    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.

    Disclosure: I am long ARNA.

    Tags: ARNA, VVUS
    May 24 9:02 PM | Link | 2 Comments
  • ARNA: Only A Disaster Sends This One Lower

    I could care less about the current battle between VVUS and ARNA longs and shorts. While I do own some ARNA calls far out into the future, I'm not trying to hype the stock up, merely making a logical assessment of ARNA's short term (< 6 months in my view) prospects.

    ARNA could be a disaster. Belviq might ultimately flop. This could be a penny stock in a few years. My calls might expire worthless.

    But not in the next 6 months.

    This stock has been so beaten down by its critics and has been so overanalyzed that the stock has found its absolute bottom for the time being, barring catostrophic news. ANY positive news whatsoever about Belviq is going to send this stock higher.

    ARNA's bears like to say that things like Esai's $65m bonus has already been priced in. That good news from the DEA is already priced in. That the launch is already priced in. That any kind of decent sales are already priced in. Nope.

    In fact, the reverse is true with ARNA. The only things really priced into the stock at this point are the delays with the DEA, the fact that Belviq is "only 40% effective," that VVUS flopped, etc.

    Someone commented the other day that there is no catalyst other than spectacular sales that will send this stock higher. I beg to differ. The catalyst I see (and a big one at that) will be Belviq doing even 50% better than VVUS did at first in sales. The cool thing is that Belviq does not have to be a blockbuster for this stock to scream higher in the short term. Once investors hear that the drug is actually being purchased in any decent manner will bring in a hoarde of new longs, just hoping to get in before the next big thing.

    This WILL happen because Esai has already basically guaranteed a launch that will at least be better than VVUS's, due to the fact that it has its massive, experienced sales force and everything already set up to go.

    Remember, Belviq might be the worst weight loss drug that a doctor will ever prescribe, but that is irrelevant for the short term outlook of ARNA's stock price. Once the market gets wind of even decent sales (which Esai will surely make happen in the beginning) it will send this stock momentarily through the roof.

    All the bad things are already priced into this stock. Unless some kind of catosprophic news comes out before the launch, ARNA is going to roar in the short term.

    Disclosure: I am long ARNA.

    Additional disclosure: While I am long, the amount of money I have invested in this stock would probably buy you a nice night on the town with your wife at the local KFC. I am an attorney without a degree in finance. However, I am what you could easily call an expert in human behavior and usually have a pretty dang good read when it comes to market psychology.

    Tags: ARNA
    Apr 07 11:35 PM | Link | Comment!
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