Want to know the power of Jim Cramer and his television show, Mad Money? A three-month chart of Arena Pharmaceuticals
Arena reported third-quarter earnings results after the market closed on Wednesday. Since all its products are in the clinical or preclinical stage, the company has no revenues to speak of (except for milestone payments from partners such as Merck
For all of 2006, Arena guided for cash usage in the range of $77 million to $83 million. The company plans to end the year with about $215 million in the bank. Based on this burn rate, Arena should have enough money to get it through most of 2008, even with an increased level of research and development spending.
Speaking of R&D, Arena started a pivotal 3,000-person phase 3 trial of its obesity drug candidate, lorcaserin hydrochloride, in September; interim safety data will be available in the summer of next year. If these results are positive, Arena will most likely initiate another two phase 3 trials with the drug in another 3,000 patients. Arena's second top drug candidate, insomnia drug ADP125, should enter phase 2 trials sometime toward the end of the year as well.
Arena did have one setback in the clinic this quarter. Merck ended the testing of Arena's niacin receptor agonist, which was in phase 2 trials to treat atherosclerosis. But the drug has been sent back to preclinical testing for additional indications, so there's still some hope for it to treat other diseases.
Even though it's still an unproven early-stage-development biopharmaceutical, Arena is an exciting company, with three drugs in development for blockbuster indications like insomnia, diabetes, and obesity. Several of these drugs will most likely fail in the clinic, but successfully bringing a drug to market for any of these indications will be enough to justify its present $700 million market capitalization. Risk-loving investors able to stand the volatility of a biotech stock may want to take a chance on Arena now. More conservative investors can wait until more clinical trial results are released, since there should still be plenty of upside left in the stock if trial results are positive enough.