Biotech Stock on Watch: Arena Pharmaceuticals Inc. (ARNA)
  • Stock Alert for Arena Pharmaceuticals Inc. (ARNA)
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    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 (26-Mar-12)   FY

    2010

    FY

    2011

    %

    Chg

    Q4

    2009

    Q4

    2010

    %

    Chg

    Symbol ARNA Revenue, $Mn 16.61 12.72 -23.42% 4.01 2.08 -48.13%
    Current price $3.01 Gross marg. -55.39% -36.32% -34.43% 47.63% 9.13% -80.83%
    52wk Range: $1.21-$2.62 Oper. margin -733.65% -882.90%  
    Avg Vol (3m): 4,795,140 Net margin -749.73% -858.65% 14.53% -704.23% -1138.46% 61.66%
    Market Cap. 543.07M              
    Shares Outstanding 180.42M EPS, $ -1.02 -0.70 -31.37% -0.23 -0.16 -30.43%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    ARNA climbed as high as $3.19, a fresh 52-week high, following news the European Medicines Agency (EMA) has accepted the filing of a Marketing Authorization Application (MAA) for lorcaserin, ARNA’s drug candidate for weight management.  The acceptance of the MAA filing begins the EMA’s review process, the company said.  The stock closed Monday’s trade at $3.01, a gain of $0.60 on the day, with strong volume of nearly 59 million shares.

    Shares in ARNA have jumped 66.3% in the last five days; 63.6% in the last month; and 107.6% year-to-date.

    Investors also welcomed the news that the U.S. Food and Drug Administration (FDA) has confirmed the scheduling of an Endocrinologic and Metabolic Drugs Advisory Committee meeting to discuss the lorcaserin New Drug Application (NDA) resubmission on May 10, 2012.

    Jack Lief, ARNA president and CEO, commented that with applications under review for approval in both the United States and European Union, lorcaserin has the potential to provide a new treatment for physicians to help patients lose weight and improve their overall cardiometabolic health.

    ARNA  submitted a New Drug Application (NDA) for lorcaserin to the U.S. Food and Drug Administration (FDA) for regulatory approval in December 2009. The FDA then issued a complete response letter (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.

    It was earlier this year when ARNA, together with partner Eisai, announced that the FDA has accepted, for filing and review, its resubmission of the NDA for its obesity drug.

    “We look forward to lorcaserin’s PDUFA date in June as well as reporting on developments related to the MAA throughout the year,” stated Craig M. Audet, ARNA’s VP of global regulatory affairs.

    Source:

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

    Financial Summary

    ARNA reported total revenues of $2.08 million for the fourth quarter ended December 31, 2011, compared with total revenues of $4.01 million in the comparable quarter of 2010. For the full year, the Company reported total revenues of $12.72 million, compared with $16.61 million in the previous year.

    Research and development expenses continued to decline to $13.1 million in the fourth quarter of 2011 from $16.5 million in the fourth quarter of 2010. Research and development expenses in the full year ended December 31, 2011, declined to $58.7 million from $75.5 million in the full year ended December 31, 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.

    ARNA realized a net loss of $23.7 million, or $0.16 per share, for the quarter, compared to $28.2 million, or $0.23 per share, in the comparable quarter of the previous year. Including $10.5 million of non-cash debt extinguishment charges and $3.5 million of restructuring charges, ARNA’s net loss in the full year ended December 31, 2011, was $111.5 million, or $0.80 per share, compared to $124.5 million, or $1.14 per share, in the full year ended December 31, 2010, which included $12.4 million of non-cash debt extinguishment charges.

    ARNA’s cash and cash equivalents totaled $57.6 million and approximately 146.1 million shares of common stock were outstanding at December 31, 2011.   In January 2012, the Company received net proceeds of approximately $27.9 million from its equity financing with certain Deerfield entities, after principal prepayment of $5.0 million on its Deerfield loan. In March 2012, the Company received net proceeds of approximately $24.7 million under an equity line of credit with Azimuth Opportunity L.P. After such financings, on March 14, 2012, approximately 180.4 million shares of common stock were outstanding.

    Source:

    http://invest.arenapharm.com/releasedetail.cfm?ReleaseID=657322

    Financial Strength (26-Mar-2012)

    Company

    Industry

    Sector

    Quick Ratio (MRQ) 1.69 1.42
    Current Ratio (MRQ) 4.20 2.13 1.76
    LT Debt to Equity (MRQ) 844.12 14.84 27.17
    Total Debt to Equity (MRQ) 856.55 18.50 36.18
    Interest Coverage (TTM) -6.46 2.36 2.32

    Source: Reuters.com, SEC Filings.

    Technical Analysis

    Source: http://stockcharts.com

    ARNA is above the upper Bollinger Band, implying that it is currently extended 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.

    The MACD for ARNA currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Mar26-2012 symbol Share, $ $ Mn 2011 2012 2011 2012
    GlaxoSmithKline plc GSK 45.61 226.14B 12.13 10.61 5.08 4.89
    Orexigen Therapeutics Inc. OREX 4.85 328.55M n/a n/a 92.03 92.81
    Biotechnology Median       17.83 n/a 8.61 n/a
    Arena Pharmaceuticals Inc. ARNA 3.01 543.07M n/a n/a 13.19 12.36

    Source: Thomson Financial

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