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Here's Why Arena Pharmaceuticals Jumped Higher Today

By Brian Orelli, PhD – Jun 2, 2020 at 2:59PM

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A rival's drug validates the biotech's approach.

What happened

Shares of Arena Pharmaceuticals (ARNA) are up 13% at 2:13 p.m. EDT because its rival, Bristol Myers Squibb (BMY -0.79%), reported positive data on Zeposia in patients with ulcerative colitis. Zeposia targets the sphingosine-1-phosphate (S1P) receptor, just like Arena's etrasimod.

So what

Typically, good data from a rival drugmaker would send shares down, not up, but ulcerative colitis is a common enough disease -- around a million Americans have it -- that there's enough room in the marketplace for more than one drug. There's also some evidence that etrasimod might be more effective than Zeposia, although the drugs haven't been compared in a head-to-head study.

Woman holding her stomach

Image source: Getty Images.

Bristol Myers Squibb's results are also the first evidence that S1P drugs can help patients with ulcerative colitis. Zeposia is already approved by the Food and Drug Administration to treat multiple sclerosis, but the new data increases the potential for the class of drugs substantially.

In fact, the data was solid enough to make some think that Zeposia -- and hopefully Arena's etrasimod too -- can compete with the Janus kinase inhibitors, such as Pfizer's (PFE 0.87%) Xeljanz, which has a black box safety warning on its label.

Now what

It's back to waiting for Arena Pharmaceuticals' investors. The biotech is currently testing etrasimod in a phase 3 clinical trial for ulcerative colitis. The study will test the treatment over the course of a year and hasn't fully enrolled yet, so it'll be at least a year before investors get to see whether etrasimod can actually compete with Zeposia.

Brian Orelli has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Arena Pharmaceuticals, Inc. Stock Quote
Arena Pharmaceuticals, Inc.
Pfizer Inc. Stock Quote
Pfizer Inc.
$44.14 (0.87%) $0.38
Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
$70.53 (-0.79%) $0.56

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