Ofcourse the opinions expressed in my Blogs are my own but I have followed the obesity race for 5 years and I believe I can credibly predict what will happen under the scenario of the FDAs determination on the Qnexa vote this week.
As obvious to the most casual observer, a roller coaster ride has been in affect for those holders of Arena Pharmaceutical shares. The ride has been bumpy but not because of the inherent strength or weakness of the stock. The gyration is a result of things beyond the control of investors whether they are invested in Arena or VVUS.
Upon close scrutiny one can see that the volume for Arena Shares has remained strong and upon shares becoming available they are being gobbled up. The stock has been under pressure on the PPS (although mightily holding an upward path) during the last few weeks. The lesson from watching this and understanding what is going on is IMPORTANT. Many investors who follow every news item and blurb that comes out on any of the three competitors are taken advantage of by firms that have enough money to blow any news out of proportion.
Which is what brings me to this blog. It is very SIMPLE. Decide whether you are a long term or short term investor. If you are a day trader you should most probably be buying your shares in Las Vegas. For those of you who bought and have the patience and a steel plated stomach, your trip has barely begun.
Friday trading was quite interesting behind the curtain. Money managers and hedge funds tried to keep the PPS under control. However, each attempt to walk the price down was met with resistance. Upon further analysis shares being purchased were in large blocks. This is indicative of Institutional Buying. In fact, 178 of these trades took place on Friday adding an estimated $6.25M in new Institutional Holdings.
On Monday when the blubs and analysts throw out their reformulated crap I recommend you take a deep breathe and take in the Knowledge that the Institutions are building their investment in Arena. On Tuesday when the vote for approval on Qnexa comes up, take a deep breathe because those institutions who bought Arena are not going to sell regardless of the Qnexa vote.
A positive vote for Qnexa with strong restrictions is the most probable outcome at this point as the FDA has previously shown its cards by a positive panel vote as well as a controlled REMs program that Qnexa has been asked to participate in over the last 4 months. I don't think the FDA would have put this much work in to this unless they were going to approve Qnexa. However the wild card is the strong restrictions which will accompany the vote.
Should Arena go down on whatever the vote is you will know that the hedge funds who bet on the wrong horse in Qnexa are attempting to get Arena shares at as low a price as possible. I give the chance of Arena seeing $8 again very unlikely despite whatever pressures can be applied. The reason is that the previous bear raids have shaken the weak hands and the folks who got a 400% return on their money are gone for the most part. No offense to the folks like me who have been holding shares for 4 years or more. This is good news because the base purchase price of a share is no longer $1.50. It is now much higher.
If you can bear remaining a bull (sorry for the pun) you should see a $20 stock as revenues start to flow. There is no bad news that is in the future. Only good news and if for only that reason...I suggest deep breaths and not much attention to what takes place next week.
As usual I give you The Truth And Nothing But The Truth
Disclosure: I am long ARNA.