Arena Pharmaceuticals (ARNA) Stock: Gaining on Drug Approval

Arena Pharmaceuticals, Inc. (NASDAQ: ARNA)

Arena Pharmaceuticals is having a relatively strong day in the market today, and for good reason. Early this morning, the company announced that it had received news from the FDA with regard to a New Drug Application. That news was that the drug prospect had been approved. Today, we’ll talk about the FDA approval, how the market reacted to the news, and what we can expect to see from ARNA moving forward.

ARNA Receives FDA Approval!

For some time now, Arena Pharmaceuticals has been working on a treatment known as BELVIX XR CIV. The treatment is designed to help consumers lose weight in a healthy way. The 20mg tablet was designed with the help of Tokyo-based pharmaceutical company Eisai.

Today, it was announced that the hard work has paid off. The United States Food and Drug Administration has made the decision to approve the drug for the indication of weight loss. This is great news as not only does ARNA have a newly approved drug under its belt, it will be receiving a milestone payment from Eisai. According to a release, the company will be receiving a $10 million payment connected with the FDA approval milestone.

Following the announcement of the FDA approval, Amit Munshi, ARNA CEO had the following to say…

We are pleased that once-daily BELVIQ XR has been approved by the FDA and will provide patients another option for weight loss… The approval of this new formulation is another example of Arena’s success in supporting our collaborators.”

How The Market Reacted To The News

As investors, one of the first things that we learn is that it’s important to watch the news surrounding publicly traded companies. That’s because this news will cause movement in the market. When positive news is released, we tend to see gains in the value of the stock associated with the news. Adversely, when negative news is released, we can expect to see declines. In this particular case, the news was overwhelmingly positive. The FDA approval marks a key milestone for Arena Pharmaceuticals. As a result, we saw gains in the value of the stock today. By the end of the trading session, the stock had gained $0.02 per share or 1.18% to close the day off at $1.72 per share.

What We Can Expect To See Moving Forward

Moving forward, I have a relatively mixed opinion of what we can expect to see from ARNA. First and foremost, there’s quite a bit of positive in today’s news. As mentioned above, not only does the company have a newly approved treatment, it will be receiving a $10 million milestone payment. While that news is incredible, it’s important to consider the risks as well. Historically, the stock has performed incredibly poorly with a horrible return on equity. On top of historical performance, there is quite a bit of risk associated with debt at the moment. Knowing this, we could definitely see further growth as a result of the approval. However, if you decide to act on that growth, make sure to move with caution.

What Do You Think?

Where do you think ARNA is headed moving forward? Join the discussion in the comments below!