Please ensure Javascript is enabled for purposes of website accessibility

Arena Pharmaceuticals Ends 2015 On a Sour Note: Can It Recover in 2016?

By George Budwell - Jan 7, 2016 at 12:04PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The pharma appears to have been a favorite name among investors shedding stocks for tax purposes last month. Can it rebound in 2016?

ARNA Chart

ARNA data by YCharts.

What: According to data provided by S&P Capital IQ, the anti-obesity drugmaker Arena Pharmaceuticals (ARNA) lost nearly 16% of its value in December. Given the lack of any obvious negative catalysts during the month, this downward move was probably the result of investors shedding the laggards in their portfolios at the end of the year for tax purposes. 

So what: Arena's shares dropped by 47% last year because of the sluggish sales for its fat-fighting pill Belviq that's marketed by the Japanese drugmaker Eisai. For the entirety of 2015, for instance, Arena is only expected to book around $38 million in total revenue. While the Street does expect Arena's revenue to jump to $47.8 million in 2016, the company will likely still be cash flow negative this year, and probably for several years to come.  

Now what: Arena and its competitor Orexigen Therapeutics (NASDAQ: OREX) have found out first hand just how tough it is to successfully market an FDA-approved weight loss medicine. Because of the lack of long-term safety on these drugs, private and public payers have been slow to offer coverage, meaning that the only option many potential patients have to try these new drugs is to pay out-of-pocket. That's rarely turned out to be a winning strategy for a prescription medicine.   

So, despite Arena and Eisai submitting a New Drug Application to the FDA for an extended-release formulation of Belviq last November, it's hard to imagine the drug's sales picking up in a meaningful way until more payers are on board. And that event doesn't appear likely until either Arena or Orexigen complete their ongoing cardiovascular outcomes trials. As such, investors will probably want to play it safe by remaining on the sidelines with these weight-loss drugmakers this year. 

George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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 Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Arena Pharmaceuticals, Inc. Stock Quote
Arena Pharmaceuticals, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/11/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.