With shares of Arena Pharmaceuticals (NASDAQ:ARNA) trading at around $9.12, is ARNA an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
While Arena Pharmaceuticals has many drugs in the pipeline, the current focus is on Belviq. This is an anti-obesity drug that can also help treat Type II Diabetes, Metabolic Syndrome and some drug addictions. Currently, Belviq is awaiting DEA scheduling, but the bigger event is whether or not the drug will be approved by the EMA. Big bets have been placed on both sides. The stock has had a huge run over the past year, but shorts aren’t backing down, which is evident considering 34.40 percent of the float is short.
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Vivus (NASDAQ:VVUS) recently went to market with a similar drug called Qsymia. Vivus has won the race to the market, but this is a marathon, not a sprint. This will also give Arena Pharmaceuticals an opportunity to watch Qsymia’s results carefully and make any necessary adjustments. An added bonus is that Arena Pharmaceuticals has a stronger sales staff. Furthermore, many experts feel Belviq is safer.
If you invested in Arena Pharmaceuticals at its IPO, then you’re not a happy camper right now. However, if you bought stock over the past three years, you’re ecstatic. If that’s the case, terrific, but what really matters is the future. Let’s take a look at some numbers.