Arena Pharmaceuticals, May Be The Last Chance To Get In Under $10

| About: Arena Pharmaceuticals, (ARNA)

Finally, news that the DEA recommended Schedule 4 classification for Arena's (NASDAQ:ARNA) Belviq on December 28, 2012. This is a classification similar to widely used insomnia drugs Ambien, Lunesta, and Sonata, although Belviq likely has even less potential for abuse than these selective benzodiazepines. Schedule 4 will likely not have a negative impact on sales potential for Belviq. The obesity drug was approved June 27, 2012. The DEA will collect comments through January 18, 2013, then a final decision should be forthwith. European approval may also come very soon (see Seeking Alpha).

There was considerable excitement last summer, Arena shares peaked around $13.50 per share, only to slide. There has been an uptrend recently, either based on the upcoming scheduling /European approval or the lack of robust initial sales of competing Qsymia by Vivus (NASDAQ:VVUS). Share prices of Orexigen (NASDAQ:OREX), with its obesity drug Contrave scheduled for possible approval in 2014, has also been on an uptrend.

From Yahoo finance

Chart forArena Pharmaceuticals, Inc.

Chart forOrexigen Therapeutics, Inc.

There is more clarity for predicting Belviq's market entry now. First, Qsymia has not sold that well which may be due to the REMS plan. One of the drug's components is Topiramate, which has a risk for birth defects. The REMS program is intended to "mitigate" this risk for women of child bearing age by educating physicians and dispensing the drug through special pharmacies. Belviq is safer than Qsymia (see Seeking Alpha), but less efficacious for reducing weight.

My opinion is physicians will be more likely, at least initially, to prescribe Belviq than Qsymia, Therefore, the time is now to buy or add to positions in Arena. News on the post-market cardiovascular safety trials must be monitored, beginning in late 2013 through 2014, if you own either Vivus or Arena. The FDA ordered Vivus and Arena to complete post-market cardiovascular safety trials with major adverse cardiovascular vents (OTCQX:MACE) as the primary trial outcome. One only need recall the disastrous sales plummet when the diabetes drug Avandia by Glaxo (NYSE:GSK) was associated with cardiovascular risk. Directly related to Belviq and Qsymia, the weight loss drug Meridia made by Abbott (NYSE:ABT) was pulled from the market because of cardiovascular risk. But for the foreseeable future, there is more upside potential for ARENA share price than downside risk. Acquiring Arena shares under $10 per share is reasonable.

Disclosure: I am long ARNA, VVUS. 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.

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