BST Trade Alert: October 17, 2014
October 17, 2014
Recommendation:
Buy Arena Pharmaceuticals (NASDAQ: ARNA) up to $5.00
About the Company:
Arena Pharmaceuticals brings innovative medicines targeting G protein-coupled receptors to patients. They launched their first approved drug, BELVIQ ® (lorcaserin HCl), in 2013. Arena is focused on discovering, developing, and commercializing additional drugs to address unmet medical needs.
The company has an exciting pipeline of drugs that should lead to many new medicines. The key milestones for ARNA in 2014 include:
- BELVIQ ® (lorcaserin HCl)– a weight loss drug is currently being commercialized in the US.
- Lorcaserin – phase 2 trials of 600 active smokers to evaluate locaserin as an aid to smoking cessation.
For this trade, we’re focusing on the results for the phase 2 trial of Lorcaserin as an aid to smoking cessation. Those results are expected to come at the end of 2014.
Arena is in excellent financial condition.
Arena has a drug that’s approved and being commercialized. That’s an enviable position among developmental stage biotechnology stocks.
Last quarter the number of prescriptions written for BELVIQ increased 43% over the first quarter. That’s more than 10,000 prescriptions being written every week!
That amounts to net product sales for BELVIQ of $9.9 million in the second quarter. And net income of 3 cents per share. What’s more, they also have $220 million in cash.
Here’s the kicker…
The revenue from BELVIQ will allow Arena to fund the development of other drugs without the need to turn to stock diluting measures or taking on debt.
Let’s now take a closer look at one of the company’s leading drug candidates…
About the Drug:
Arena has proven they are capable of discovering and developing drugs that can be approved for commercialization. That’s a huge step for any biotech company.
BELVIQ is proof that their proprietary GPCR technologies work. Now they’re investigating lorcaserin for possible new indications, using different formulations, and in combination with other drugs.
One of the first things they’re doing is a phase 2 trial to see if it helps in smoking cessation.
About the Market for This Drug:
Needless to say, there’s a lot of money to be made helping people lose weight and stop smoking. Arena is clearly targeting markets that can make them boatloads of money.
If the results from the phase 2 trial for smoking cessation are positive, we should see a big uptick in Arena’s stock price. In fact, Arena thinks there could be an entire line of products built on this technology.
About the Potential Catalyst:
The phase 2 trial of 600 active smokers to evaluate locaserin as an aid to smoking cessation is ongoing. Results are expected toward the end of 2014.
About the Shares:
We have an opportunity to grab shares of ARNA for $4.01.
Sales of BELVIQ have fallen short of investors lofty expectations. As a result, ARNA is now trading at a nice discount to where it was earlier this year.
As you can see on the chart below, the stock is 50% below the 52-week high. But you’ll notice the stock has rebounded more than 20% since it put in a new 52-week low recently.
At this point, the disappointment from the weak initial sales of BELVIQ are fully baked into the stock price. Any good news about BELVIQ sales or additional uses for this technology should send the stock soaring higher.
Grab your shares of ARNA as soon as possible. This biotech stock’s a great buy up to $5.00 per share.
Key Facts:
| Company: | Arena Pharmaceuticals |
| Ticker: | ARNA |
| Recent Price: | $4.01 |
| Market Cap: | $888 million |
| Avg. Daily Volume: | 4.54 million shares |
Chart:
Category: BST Trade Alert
