When it comes to pharmaceutical stocks, two companies that have been making news recently are Arena (NASDAQ:ARNA)and Dendreon (NASDAQ:DNDN). Investors in Arena have been on edge waiting for the approval of the company’s new diet drug. The U.S. Federal Drug Administration (FDA) approved the lorcaserin compound last June, but they also classified it as a Schedule IV drug, which makes it subject to more additional Drug Enforcement Agency (DEA) controls.
Since that time, Arena has been waiting for the DEA to review and classify the compound because they plan to market as a drug called Belviq. The whole process was supposed to take around five months at most, but it has been more than eight months at this point. Arena has also had problems in the European market. In the beginning of last year, Arena submitted the issue to the European Medicines Agency (EMA) for approval. Investors were not worried until Arena received a second letter from the EMA this January saying there were outstanding issues that needed to be addressed. Some of the issues raised by the EMA were tumors in rats as well as psychiatric events.
Since the notice, a decent “short” position has developed with investors selling short because they expect the company to experience more problems with the new diet drug. Some wonder whether the bear view of this stock has been a bit hyped up though and what the eventual result will be.