Biotech Stock on Watch: Arena Pharmaceuticals Inc. (ARNA)
  • Stock Alert for Arena Pharmaceuticals Inc. (ARNA)
  • Stock Alert for BioSante Pharmaceuticals Inc. (BPAX)
  • " />

    Stock Alert for Arena Pharmaceuticals Inc. (ARNA)

    Arena Pharmaceuticals Inc. (ARNA) is a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing oral drugs that target G protein-coupled receptors, an important class of validated drug targets in four major therapeutic areas: cardiovascular, central nervous system, inflammatory and metabolic diseases. The Company’s most advanced drug candidate is lorcaserin, for weight management, which has completed a pivotal Phase III clinical trial program.

    Share Statistics (06-Jan-12)   FY

    2009

    FY

    2010

    %

    Chg

    Q3

    2010

    Q3

    2011

    %

    Chg

    Symbol ARNA Revenue, $Mn 10.39 16.61 59.9% 7.63 3.46 -54.7%
    Current price $1.62 Gross marg. 37.1% 55.4% 49.3% 76.3% 54.9% -28.0%
    52wk Range: $1.21-$2.62 Oper. margin -654.4% -558.0%
    Avg Vol (3m): 1,802,180 Net margin -1474.5% -749.7% -49.2% -475.4% -657.2% 38.2%
    Market Cap. 236.56M              
    Shares Outstanding 146.02M EPS, $ -1.75 -1.02 -41.7% -0.20 -0.16 -20.0%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    Shares of ARNA dropped as much as 9% to $1.55 on Friday, with volume of 2.63 million shares traded.  Over the last 52-weeks, the stock has reached a low of $1.21 and a high of $2.62. The stock closed the session at $1.62, below its 50-day moving average of $1.78 and above its 200-day moving average of $1.49. At Friday’s closing market price, the ARNA’s market capitalization stands at $236.56 million.

    Shares of the obesity drug maker have dropped 13.4% in the last five days; 13.8% in the last month; and 23.2% year-to-date.

    ARNA shares were boosted earlier last week after the San Diego-based company and partner Eisai announced that the former has submitted its response to the U.S. FDA’s complete response letter (CRL) following review of the lorcaserin New Drug Application, or NDA.

    ARNA submitted an NDA for lorcaserin to the U.S. Food and Drug Administration (FDA) for regulatory approval in December 2009. The FDA then issued a CRL in October 2010, outlining non-clinical and clinical reasons for its decision to not approve the drug, and provided recommendations relating to addressing the issues it raised in the CRL.  In January 2010, the Company completed an end-of-review meeting with the FDA for the locaserin NDA, which resulted in additional requirements.

    In its latest release, the Company stated the lorcaserin CRL includes data and analyses that were not incorporated in the original NDA, including the results of its Phase III BLOOM-DM (Behavioral modification and Lorcaserin for Overweight and Obesity Management in Diabetes Mellitus) clinical trial, which evaluated lorcaserin for weight loss in patients with type II diabetes.

    Additionally, the new information includes data and analyses from activities intended to address tumors observed in a two-year lorcaserin rat carcinogenicity study, cell culture experiments intended to further refine serotonin subtype 2 receptor activity and rat studies designed to further assess abuse potential.

    It is expected that the FDA will confirm acceptance of the response and assign a new Prescription Drug User Fee Act (PDUFA) date by the end this month.

    The Company is set to present at the 30th Annual J.P. Morgan Healthcare Conference in San Francisco on Wednesday, January 11th. Jack Lief, ARNA’s president and CEO, is scheduled to provide a corporate overview, including with regard to the Company’s recent resubmission of the new drug application for lorcaserin.

    About Lorcaserin

    Lorcaserin is an investigational drug candidate intended for weight management, including weight loss and maintenance of weight loss, in patients who are obese (BMI > 30) or patients who are overweight (BMI > 27) and have at least one weight-related co-morbid condition. Lorcaserin is a new chemical entity that is believed to act as a selective serotonin 2C receptor agonist. The serotonin 2C receptor is expressed in the brain, including the hypothalamus, an area believed to be involved in the control of appetite and metabolism. ARNA has patents that cover lorcaserin in the United States and other jurisdictions that in most cases are capable of continuing into 2023 without taking into account any patent term extensions or other exclusivity ARNA might obtain.

    Source: http://invest.arenapharm.com/releases.cfm

    Financial Summary

    For the third quarter ended September 30, 2011, ARNA reported total revenues of $3.46 million , compared to total revenues of $7.63 million in the comparable quarter of 2010. Total revenues for the first nine months of 2011 came in at $10.64 million, versus the prior year period’s $12.60 million.

    Research and development expenses continued to drop in the third quarter of 2011 to $15.0 million, compared to $20.2 million in the previous year, while research and development expenses in the first nine months of 2011 declined to $45.6 million from $59.0 million in the first nine months of 2010. The Company attributed the decreases to its first quarter 2011 workforce reduction and ongoing cost-containment efforts, as well as completion of the Phase III lorcaserin clinical trials.

    The Company realized a net loss of $22.7 million, or $0.16 per share, for the quarter, compared to $36.3 million, or $0.31 per share, in the third quarter of 2010. Including $10.5 million of non-cash debt extinguishment charges and $3.5 million of restructuring charges, the Company’s net loss in the first nine months of 2011 was $87.8 million, or $0.64 per share, compared to $96.3 million , or $0.91 per share, in the first nine months of 2010.

    ARNA’s cash and cash equivalents totaled $77.9 million at September 30, 2011, and about 146.0 million shares of common stock were outstanding.

    Source: http://invest.arenapharm.com/releasedetail.cfm?ReleaseID=622502

    Financial Strength (06-Jan-2012)

    Company

    Industry

    Sector

    S&P 500

    Quick Ratio (MRQ) 1.54 2.05 0.76
    Current Ratio (MRQ) 4.48 2.00 2.63 1.13
    LT Debt to Equity (MRQ) 252.10 29.91 34.55 108.41
    Total Debt to Equity (MRQ) 266.09 33.30 46.22 146.72
    Interest Coverage (TTM) -8.67 3.15 1.45 26.66

    Source: Reuters.com, SEC Filings.

    Technical Analysis

    Source: http://stockcharts.com

    ARNA is below the lower Bollinger Band, implying that it is currently extended to the downside from its recent trend. Be aware, however, that a cross outside of the Bollinger Bands can sometimes be a signal of trend strength and not, necessarily, trend reversal.

    ARNA’s MACD is indicating a weak bearish signal. Although the indicator is above the critical level of 0, which implies that the underlying moving averages are bullish, the MACD has crossed below its 9-day moving average or signal line. This suggests that positive momentum has begun to slow.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Jan06-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Orexigen Therapeutics Inc. OREX 1.83 87.51M n/a n/a 19.58 21.71
    GlaxoSmithKline plc GSK 46.13 229.71B 14.74 13.18 5.31 5.13
    VIVUS Inc. VVUS 10.06 904.82M n/a n/a n/a 22.36
    Biotechnology Median       15.28 n/a 7.84 n/a
    Arena Pharmaceuticals Inc. ARNA 1.71 236.56M n/a n/a 16.97 6.73

    Source: Thomson Financial

    DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority.  We are neither licensed nor qualified to provide investment advice.

    The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice.  The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities.  We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

    Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company.  An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report.  Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.

    Any individual who chooses to invest in any securities should do so with caution.  Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested.  Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.

    Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934.  Subscribers are cautioned not to place undue reliance upon these forward looking statements.  These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated.  Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC.  You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

    We are committed to providing factual information on the companies that are profiled.  However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions.  We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so.  Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

    To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

    We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

    Leave a Reply

    Your email address will not be published. Required fields are marked *