Why Arena Pharmaceuticals Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotechnology company Arena Pharmaceuticals (Nasdaq: ARNA  ) rose as much as 14% on rumors that it could be a takeover target by a larger pharmaceutical company.

So what: According to a report by MarketWatch, Arena's shares were rising due to an unconfirmed rumor that there may be interest in purchasing the biotech company. Arena received approval for diet drug Belviq last month -- the first FDA-approved obesity treatment in more than a decade.

Now what: It isn't a stretch to assume that a big pharmaceutical company could be interested in Arena. About one-third of the U.S. population is overweight, so the implications of a diet drug when coupled with a diet could lead to multibillion-dollar possibilities.

It will not, however, be a cakewalk for Arena. For one, Belviq still needs to be successfully launched. As we've witnessed from multiple biotechs recently, launching a new drug successfully is almost as difficult as getting it approved in the first place. There's also VIVUS (Nasdaq: VVUS  ) , which received FDA approval for Qsymia (formerly Qnexa) as well. Arena would probably be very smart to ally itself with a company that has deep pockets and has a strong history of marketing new drugs, but I'd refrain from buying too willy-nilly into these as-of-now-unconfirmed rumors.

If you want the scoop from our analysts on what opportunities and pitfalls await Arena, then you have to get your copy of our latest premium research report on Arena Pharmaceuticals. Complete with a year's worth of updates, this research report will give you the investing edge you need! Click here to get your copy.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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  • Report this Comment On August 14, 2012, at 3:43 PM, Dogbone48 wrote:

    I don't think the launch will be a problem. As a physician I have no arsenal of medications for obesity and I have at least 5 patients a day that want some help. This will be a blockbuster drug.

  • Report this Comment On August 14, 2012, at 3:51 PM, YankeesGiants wrote:

    long overdue correction...there aint no buyout. I believe we have upside to make up.

  • Report this Comment On August 14, 2012, at 4:04 PM, Foreeverlong wrote:


    IMO,the buy-out rumor is a convenient interpretation of what happened today (and you may be right), but I wouldn't interpret that way. The volume today was substantial, and I don't think institutions are that naive. And, by the way Arena already has a major BP partner in Eisai. Last I heard, Eisai is in the top 20 BP's. What this could be is anticipation of an announcement that Eisai and Arena are going to merge, but what it could also be is that DEA approval and scheduling is imminent, i.e. coming sooner than analysts thought would happen.

    There is a lot of misinformation out there about Qsymia and Belvq. When all is said and done, the sales of Qsymia will not be close to those of Belviq. Listen to the physicians on this, and you find that they have been saying this for a long time, but no one is hearing them.

  • Report this Comment On August 14, 2012, at 4:05 PM, Foreeverlong wrote:

    Sorry Sean. Did not mean to mispell your name.

  • Report this Comment On August 14, 2012, at 4:16 PM, genesis667 wrote:

    The comment regarding Belviq being successfully launched is BS.....IF ARNA were doing the launch there may be some issues, they have a highly successful multi-billion dollar pharma in Eisai doing the launch....The launch will go seemlessly, as Eisai has done with numerous drugs......VVUS, on the other, is going to look like a monkey bumping a football attempting to go it alone.....

  • Report this Comment On August 14, 2012, at 9:57 PM, thaitross wrote:

    "Arena would probably be very smart to ally itself with a company that has deep pockets and has a strong history of marketing new drugs, ...."

    If you're going to write about a company, you should first know what you're talking about. Have you heard of a little company named Eisai? It seems that Arena has already allied themselves with Eisai...a pretty smart move.

    Do your research before spouting off.

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