2-Star Stocks Poised to Plunge: Arena Pharmaceuticals?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, clinical-stage biotechnology company Arena Pharmaceuticals (Nasdaq: ARNA  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Arena's business and see what CAPS investors are saying about the stock right now.

Arena facts

Headquarters (founded) San Diego, Calif. (1997)
Market Cap $499.8 million
Industry Biotechnology
Trailing-12-Month Revenue $11 million
Management Co-Founder/Chairman/CEO Dr. Jack Lief
Co-Founder/Chief Scientific Officer Dominic Behan
Return on Capital (average, past 3 years) (33.4%)
Cash/Debt $88.2 million / $87.8 million
Competitors GlaxoSmithKline
Orexigen Therapeutics
VIVUS

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 9% of the 689 members who have rated Arena believe the stock will underperform the S&P 500 going forward.

Just yesterday, one of those bears, biotech expert zzlangerhans, offered a couple of reasons to bet against the approval of Arena's obesity drug lorcaserin:

One is that while the actual meeting doesn't take place until May 10, the FDA will release briefing documents on May 8. I think while the committee vote is a toss-up, the briefing documents are much more likely to be negative and drive the share price downward. ...

The second reason is that I want to be on [Adam Feuerstein's] side of this call. While his detractors endlessly point to the same incorrect or partially incorrect calls after years have passed, Feuerstein has continued make confident predictions the vast majority of which prove to be accurate. Some recent beauties are the abject failure and impending bankruptcy of Radient Pharmaceuticals, the downward trajectory of Biosante, and of course the negative result of the phase III trial of perifosine for Keryx and Aeterna Zentaris.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of GlaxoSmithKline. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.


Read/Post Comments (10) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 04, 2012, at 1:59 PM, krapbuster wrote:

    Foolish for Motley Fool to want to be on same side of call as AF's hedge fund friends. As for ARNA Lorcaserin is safe, effective, and well tolerated in trials with 8,000+ patients. Lorcaserin has successfully passed 2nd endpoint meeting FDA own guidelines for efficacy, and ARNA's 2010 adcom meeting with zero Oncologists voted no due primarily due to rat data on 82 times dosage equivilent, and data not seen in humans. 5 independent specialists opined in 2011 that ARNA had the data coorect and that FDA were mistaken in their findings.

    Aggregated intelligence of 180,000? They need to do better research from trusted sources.

  • Report this Comment On May 04, 2012, at 2:55 PM, Investstack wrote:

    I thought Motley Fool was suppossed to educate and not fall prey to creating market stories that further the objectives of hedge funds at the expense of individual investors.

  • Report this Comment On May 04, 2012, at 3:12 PM, beatlesforever wrote:

    1) Using Adam as a guide is very dangerous. His wrong calls are not just old but very recent ones too.

    2) I'd rather use scientific data to make a decision than what a guy who works for Jim Cramer says. The data clearly points to approval.

  • Report this Comment On May 04, 2012, at 6:48 PM, hatch23 wrote:

    Very disappointed with the Motley Fool for posting an article like this. I notice that all the responses above have been negative and agree with me.

    It's a shame no one wants to do research anymore.

    Yes, it might drop on the documents on May 8th, but should easily pass the advisory committee meeting. Arena's drug is the safest of the 3---I cannot believe the FDA would reject the safest drug, but who knows-they might.

  • Report this Comment On May 05, 2012, at 3:04 PM, satydave wrote:

    I remember Adam F. was wrong about FDA approval for both DNDN and BIIB in the past. His research is often slanted and appears biased. I think he is wrong about ARNA. ARNA has removed any doubts mentioned in CRL and will be recommended by Adcom this time.

    I am long ARNA.

  • Report this Comment On May 05, 2012, at 5:33 PM, prginww wrote:

    Motley Fool, to educate (fail), amuse (fail) & enrich (fail). Disappointing to say the least.

  • Report this Comment On May 05, 2012, at 7:16 PM, Vanmusicblues wrote:

    poor results, poor trial design , and big weight gains after quitting the product make this a sure loser.Even Adam is correct on occasion and his track record is much less than .500

  • Report this Comment On May 05, 2012, at 7:37 PM, helpmesav wrote:

    ARNA will be approved and you fools will be as they say ' motley '

  • Report this Comment On May 06, 2012, at 10:31 AM, mojo56 wrote:

    Response to Vanmusicblues:

    Poor results? ONLY in comparison to combo drugs like qnexa & contrave: Results are similar to all other SINGLE weight loss drugs with the one exception of amphetamine phentermine: which is the source of qnexa's so-called excellent results (& which can be combined with lorcaserin for equally & probably better efficacy & much better safety)

    Poor trial design?? You gotta be kidding. Biggest trials by far with 8000 subjects. Most rigorous "placebo" that produced excellent weight loss for "placebo" which skewed placebo-adjusted efficacy downward. Only trial to include substantial minority population of black, Hispanic, & other -- again skewing efficacy downward due to historical lower results with this population. "Sanitized" population criticism of 2010 AdCom discredited by results from Bloom-DM for diabetics, showing good efficacy for this population & stellar results for glucose control.

    Weight gains after discontinuation : who you kidding? Same for all such drugs.

  • Report this Comment On May 07, 2012, at 7:54 AM, no40wonk wrote:

    Accuracy of someone's "calls" on negaticve results for drug approvals is no basis for confidence. Any fool could go out and predict that every drug that is in clinical trials would fail. That person would be right 80% of the time and you can call them clairvoyant. Fools and tools.

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