Arena Pharmaceutical Stock Holders Get Fatter

Jun 27, 2012
J. Webster
Comments Off on Arena Pharmaceutical Stock Holders Get Fatter

Do you ever see those ads on television for weight loss products that are cheap or promise to pay you to lose those unwanted pounds? Shareholders of a biotech firm were paid handsomely today for the possibility of millions of people around the world losing weight. Today a stock trading on the Nasdaq Stock Exchange shot higher for investors who have been patiently waiting on weight loss drug Lorcaserin from Arena Pharmaceuticals.

The weight loss drug will now be marketed as Belviq. The drug will be sold by Eisai, a large Japanese drug firm. Arena sold the licensing rights for an upfront payment and will receive royalty payments on the sales of Belviq. Opportunity is huge for a weight loss drug. The pill is expected to be sold for a couple of dollars a day. In a country where over two thirds of the people are obese or overweight, perhaps shares of Arena should be up more.

The drug has been tested for several years before today’s approval. Average weight loss was 3-3.7% of total body weight. Almost half of patients not affected by Diabetes saw 5% total weight loss. The drug triggers a portion of the brain to tell a consumer that they are full and helps control appetite.

It’s been a wild ride for Arena shareholders. The stock has traded between $1.23 and $13.50 in the last fifty two weeks. Shares have steadily been rising for the last three months, rewarding shareholders with gains of 250%. Shares hit $8 back in 2010 before being sent down to $2 after concerns were raised about Lorcaserin’s approval. Amazingly enough people who invested in 2000 or 2006 would still be at a loss as shares once traded for levels over $40 and $20 respectively.

Considering how lazy Americans are, I wouldn’t be surprised to see shares of fitness chains and dieting plan companies like Nutrisystem and Weigh Watchers (WTW) drop. Why work out or eat healthy if a simple pill can help people lose weight? Health insurers could also benefit as the cost efficient drug could cut down the number of surgeries and costly procedures that insurers pay for.

Two other companies with weight loss drugs in trials saw shares rise on the backs of Arena’s approval. Vivus (VVUS) was up over 7%, while Orexigen Theraputics (OREX) shares rallied 20% during Wednesday’ trading session. None of the three weight loss stocks moved more than 2% in after hours trading.

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