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Bad News For Celgene May Be Good News For Arena

Spencer Osborne profile picture
Spencer Osborne


  • Celgene gets RFT Letter from FDA regarding Ozanimod.
  • Celgene Acquired Ozanimod by buying out Receptos for $7.2 billion.
  • Arena touts Etrasimod as best in class.

Arena Pharmaceuticals' (ARNA) investors have long thought that its drug Etrasimod was a potential best in class candidate despite the head start that a competing drug Ozinamod possessed. That head start led to Celgene (CELG) buying out Receptos for about $7.3 billion two years ago. Time has passed and Etrasimod is now getting close to moving into a phase 3 clinical trial for ulcerative colitis.

Last week Celgene took a hit on its stock on the news that the FDA forwarded a "Refusal To File" letter regarding an NDA for treating multiple sclerosis with Ozanimod. Essentially it was reported that the FDA took exception to a lack of information. In the letter the FDA noted, "the FDA determined that the nonclinical and clinical pharmacology sections in the NDA were insufficient to permit a complete review."

To be clear, this is not a rejection letter. Ozanimod is still progressing through the required FDA steps. That being said, the setback means that Arena has just narrowed the gap between potential launches. For its part, Arena is planning on conducting head to head comparisons to drive what it sees as key advantages for Etrasimod over the Celgene offering.

The result of this news is that Arena is now trading above $44 per share at a time when the company seems to be attracting more institutional investors and has wind in its sails from analyst price targets, some of which are more loftier than the current trading price.

What seems to be happening is that Arena is chewing up analysts' price targets earlier than analysts have projected, and that could make analysts revisit their respective models and assign new price targets.

It has been my opinion that Arena is a prime merger or buyout candidate in 2018. The company has several near term catalysts on

This article was written by

Spencer Osborne profile picture
Spencer Osborne assesses equities in a data supported realistic manner that is often missing in analysis that the average retail investor receives. His analysis is what investors NEED to hear rather than what they WANT to hear. He believes that the foundation of an equity price is based on what is probable rather than what is possible, and the trade focuses on possible near term catalysts and news. Smart investing is understanding how the market works and how that market mentality impacts a given equity. Spencer believes that investors should model their expectations and maintain a critical eye on whether those expectations are being met. If an invesor finds herself making excuses for missing the mark, then they are losing objectivity.

Analyst’s Disclosure: I am/we are 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.

I have no position in Celgene

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (38)

Spencer Osborne profile picture
Johnson and Johnson just received a $2.1 billion offer for its insulin pump business which generated $1.5 billion in sales last year. Even with big sales, the premium is small.
Rod27 profile picture
can u keep the MNKD comments to that article?

Spencer....plz comment on the ARNA sale of facility in Switzerland.
Spencer Osborne profile picture

I am on vacation. I am keeping informed, but trying to stay away from to much equity research for a few days
jameshermann01 profile picture
I have been with arena since it was 10 and dropped to the low 1 range, but as cellular biologist I was impressed with the science.I presently have 40,000 shares of the stock and look forward to the progress of the science when the read outs in phase two are in and the phase four are in .
jameshermann01 profile picture
long time investor in arena though the good times and bad.still have 40,000 shares.
I have since tripled my investment after the reverse split!
Thank you Spencer.
You can take a fact and make it look positive or negative . Spencer is a master of making Arena looking less than good .
gazoo99 profile picture
This I must agree upon.
Rod27 profile picture
Spencer has been predominantly right about ARNA over the years.
Without a doubt, Spencer is one of the reasons I road Arna all the way down. He is painfully honest and has amazing insight and an ability to remain objective at all times.
Mktneutralhedger profile picture
It seems that when biotech and pharma look cheap they are ex-growth. Stocks like ARNA instead that look expensive and a value investor would not touch they keep on rising. Speechless.
Right you are. Not for everyone. But I am enjoying the last 8 month’s and the anticipation of the upcoming readouts
@S Spencer you are assuming I was being liberal with your position which I am not. Your theses and emotions are 2 different things. I was just saying you have the right to maintain both.
Spencer Osborne profile picture

My response to you was more for the benefit of others than a direct reply to you. I do not get upset (per-se) if an investment I own goes south. I assess and make the appropriate move.

With Arna, my play on the antio-bestity space was not well rewarded, though I did not really take a hit in my account thanks to savvy trading and timing. What I maintained in ARNA was a play on the pipeline, not on Belviq.
Even when Spencer had few things good to say he still kept a small position in ARNA. Even an author can be pissed if holding a stock moving south. So he has the right to celebrate with Longs.
Spencer Osborne profile picture

I do not let whether or not I hold an equity dictate what I write. I Offer realistic assessment and opinion based on numbers and data. When the numbers and data dictate that I be critical, I am. When they dictate that I be optimistic, I am.
Spencer, thanks for writing and sharing this article. You have always been fair and honest in your reporting and I respect that. Because I believe in the future of ARNA, I was great to see your positive endorsement of the company. I won’t invest the farm but I invested the entire proceeds from the sale of two rental homes on the stock. Your endorsement is appreciated.
gazoo99 profile picture
First thing I'm going to say is...I'm VERY LONG on ARNA, and have been since prior to the first AdCom.

But this article even though it's a good positive article is written by the author Spencer Osborne who previously BASHED THE HELL out of ARNA for many years. What gives Spencer?
Bashed them and they deserved it. Look what happened to the stock price. So that makes articles like this more believable. I sure do enjoy seeing him using numbers like $5,10 or 15 billion in a buyout. Even at the low end of that there is a 3 fold increase over where we are now.
Spencer Osborne profile picture

I do not bash, I offer realistic assessment.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

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