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  • Where Do We Go From Here And How Will Upcomming Binary Events Effect Arena 14 comments
    Jul 7, 2012 4:43 PM | about stocks: ARNA

    As those of you who follow the race to beat obesity you no doubt have watched the race to provide a drug to help carve those unsightly pounds. Obesity effects 1/3 of the American population and the recent approval of Belviq, a new medicine to be used in conjunction with exercise, has caused gyrations in the price of Arena Pharmaceuticals. Arena, which was started by CEO Jack Leif back in 1997, has seen its stock as high as $47 a share and as low as $1 a share. This is quite a range for a company that has been around for 15 years.

    In the last few months Arena stock has been commented on by almost every analyst, citizens group and brokerage house. As a result Arena which could be hard to spot on the CNBC ticker if you watched all day can now be seen 20 times per minute.

    Although, familiarity with Belviq is growing, I would venture to say that few people outside of Wall Street are even aware that the FDA gave its approval to the drug less than 2 weeks ago. Upon approval Arena stock jumped to $13.50 from a low of $7.80 on the same day. The stock has been trading in excess of 30M shares a day since its approval.

    It is difficult to monitor the stocks ups and downs because of trading by hedge funds, both short and long retail investors, as well as banks and brokerage houses. To simplify, many investors who thought Arena would not receive approval bet wrong on the stock. Now in order to salvage any hope of getting their money back these entities that bet against approval are using unscrupulous tactics to save their souls.

    These tactics include spreading false rumors to get retail longs to cash their shares in at prices that would seem very low given the eventual payoff for these shares. One only needs to look at the daily news stories picked up on a daily basis to see how this is done. An example is a news article posted by Dean Marin of Wall St. Cheat Sheet late Friday. She claims "Arena Pharmaceuticals, Inc. (NASDAQ:ARNA): On June 27th, 2012, the US FDA approved the new diet pill Belviq. According to Reuters, Belviq (Lorcaserin), by Arena Pharmaceuticals, is the first weight-loss drug to be approved in 13 years. In the briefing documents for the May 10th, 2012, FDA Endocrinologic and Metabolic Drugs Advisory Committee, reviewers expressed concerns on safety of the drug, as it may cause heart problems. Hence, the stock is finishing Friday on a cautionary note."

    This news was from May 10th, almost 2 months ago and obviously before the FDA stating clearly that Belviq has NO issues with heart problems. So what purpose does such information serve other than to trick investors? This is only a mild example of what takes place with rumor and innuendo on a daily basis.

    Getting back to reality, several binary events will be coming up in the near future for Arena. On July 17th, a competitor drug known as Qnexa will be either approved or denied by the FDA. While I place a 50-50 chance on approval, it would appear that safety issues with that drug may preclude an affirmative vote by the FDA. Regardless of the vote, Qnexa will be required to have several restrictions for its use.

    On July 27th, The European Medicines Agency (EMA), will provide questions back to Arena that will provide an input to whether Belviq will get a seal of approval in Europe. Although it is not a sure thing, I put the odds of eventual approval at 80% or better. The EMA has already shown indication that Qnexa will not be approved in Europe.

    So what we are looking at in Belviq is a new novel drug that will help overweight individuals lose pounds. Important to note is that the first 10 - 15 pounds is MOST IMPORTANT as individual on the cusp of Type 2 Diabetes and patients with high cholesterol will see positive improvements with this drug. The drug has also shown promise in helping with cessation of smoking.

    Based on Belviq going viral over the next few months this news will get out to the public very quickly. According to Arena, a half Billion Pills have already been manufactured in a facility in Switzerland. The drug should see a roll out in about 4 months as the result of a final labeling review by the DEA. All indications are that everything is pointing north for Arena and its shareholders. I expect shares of Arena to move towards $20 if Qnexa gets turned down by the FDA and $15 if it gets approved with expected restrictions. Upon EMA approval and word of mouth the stock should be closer to $40 by the end of this year.


    With Regards...

    Disclosure: I am long ARNA.

    Themes: Belviq Stocks: ARNA
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Comments (14)
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  • Nice and concise....
    The beneficial effects in diabetic patients should not be overlooked. Lowering HGBA1C to levels below currently approved antihypoglycemic agents is grounds for "blockbuster" status. If 10% of diabetics can eliminate other high cost hypoglycemic agents with harmful side-effects and lower body weight at the same time, this will be a game changer.
    7 Jul 2012, 11:29 PM Reply Like
  • Author’s reply » Thank You and the diabetes angle is only one advantage. We also know about smoking cessation as well as a possible cure for erection disfuntion.
    14 Jul 2012, 04:43 PM Reply Like
  • Nice article...
    Lets not forget the beneficial effects in diabetic patients and the reason this medication will reach "blockbuster" status.
    -Allow diabetics to reduce number of oral hypoglycemic agents when added to therapy and simplifying regimen
    -Reduction in HGBA1C beyond currently approved oral hypoglycemics with fewer side effects
    7 Jul 2012, 11:29 PM Reply Like
  • You must read Alliance for Natural Health's July 3 message about the new diet drug. Money is not the only goal in life. Please read. Thank you.
    7 Jul 2012, 11:35 PM Reply Like
  • Author’s reply » Emily while I agree with you statistics prove that diet and exercise do not work. That is wht we have a pandemic situation.
    14 Jul 2012, 04:43 PM Reply Like
  • as you said that the chance for Qnexa is 50/50.


    What will happen to ARNA stock price if Qnexa gets approval with no restriction?
    8 Jul 2012, 12:37 AM Reply Like
  • " if Qnexa gets approval with no restriction."


    8 Jul 2012, 02:20 PM Reply Like
  • The market has already said what will happen. ARNA is up nearly 600% ytd while VVUS is up 200% ytd....ARNA will be the big winner between the two. And there is no way in the world Qnexa will come to market without severe restrictions. It increases the risk of birth defects 7 fold.
    8 Jul 2012, 02:26 PM Reply Like
  • Author’s reply » Hi James...please see my latest post.
    14 Jul 2012, 04:43 PM Reply Like
  • Author’s reply » Facts that will be considered in the final evaluation!
    14 Jul 2012, 04:43 PM Reply Like
  • good article...$40 is problably conservative factoring in multiple buyout offers soon to come.Big pharma will fight hard to grab ARNA. After the buyout concentrate your DD on another small bio tech with a pipeline that will be a 8 bagger at least..I will give it to you soon...
    8 Jul 2012, 02:58 PM Reply Like
  • Author’s reply » Thanks Topperg
    14 Jul 2012, 04:43 PM Reply Like
  • Lets not forget that Belviq is nearly as effective as Metformin for treating Diabetes....None of the analysts have modeled in any sales in that regard....


    As the 2nd line choice for Diabetes behind Metformin, Belviq could earn hundreds of millions in revenue in addition to the billions in sales for weight loss, not too mention it is also effective in aiding to stop smoking and drug withdraw.....


    It's only a matter of time before a major pharma company comes knocking on the door, with a big ole check in hand....At $11.25 a share, I'll be buying another few thousand shares on monday....


    As for VVUS, another CRL will be announced soon....They did not finish the study the FDA wanted, so it isn't going to be approved.....
    8 Jul 2012, 03:09 PM Reply Like
  • Author’s reply » Excellent points Genisis...I added to my position this week as well.
    14 Jul 2012, 04:43 PM Reply Like
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