Approval! Hefty Increase for Arena's Shares

Bust out the milkshakes: Arena Pharmaceuticals' (Nasdaq: ARNA  ) obesity drug lorcaserin, now called Belviq, won the approval of the Food and Drug Administration today.

My theory that the drug would need post-marketing studies was correct; Arena is required to do six different studies, in fact. What's surprising is that the company was able to negotiate all of that in just over a month since the FDA advisory committee meeting. The efficiency of Arena's management and its partner Eisai should give investors confidence in their ability to push the drug along.

Eisai won't launch the drug immediately because it has to go through a review by the Drug Enforcement Administration to determine whether Belviq has to be classified as a scheduled drug. The FDA recommended that the drug be scheduled because there's potential for it to be abused.

The delay is likely to push an approval beyond VIVUS' (Nasdaq: VVUS  ) decision date for Qnexa, but Belviq might still make it to market first since VIVUS doesn't have a partner yet. They'll both beat Orexigen (Nasdaq: OREX  ) , which is still years away.

Not that it really matters who launches first. The obesity market is large enough -- dare I say, obese enough -- that there are plenty of patients to go around. Patients will try one drug, and then if it doesn't work, they'll try another. In fact, the Belviq label instructs doctors to discontinue the use of the drug if patients fail to lose 5% of their body weight after just 12 weeks on the drug.

Doctors aren't required to follow that guideline, nor do they have to follow the suggestion to only use it on patients with a BMI of greater than 30 or greater than 27 if they have a weight-related comorbid condition like diabetes. I imagine some doctors will prescribe it more generally, although perhaps not until they get a little more experience with the drug, considering past experiences with Fen-Phen and Abbott Labs' (NYSE: ABT  ) Meridia.

We'll see in the coming weeks. Now go finish that milkshake.

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Fool contributor Brian Orelli holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Abbott Laboratories and has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On June 27, 2012, at 9:29 PM, eeechooo wrote:

    Is this about Arena or it's competion? I can't really tell.

  • Report this Comment On June 28, 2012, at 12:26 AM, MathisYoung wrote:

    What increase, the 28% is what the retail investors gave back last week. It seems weird that before FDA approval we close higher than the day of approval. Can the shares be any cheaper for shorts? Its almost like they did'nt even think of the price before the MM resume normal trading w/o price correction. When I do the math the stock should be at lease 13-15 pps. Divide the MC by the number of OS and we are far from where we need to be. Im long ARNA and VVUS and would have expect at lease half of VVUS pps for ARNA. Since all is done lets see if we get a gap after pre-market when open comes. I would assume ask/bid will be around 14-15 a share. That is fundamental correct and just fair game.

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