Why Arena Pharmaceuticals Stock Slimmed Down in March

What happened

According to data from S&P Global Market Intelligence, shares of Arena Pharmaceuticals (NASDAQ: ARNA  ) dropped by 8.75% in March. Interestingly enough, though, the biotech's stock slumped last month without a discernible material or newsworthy event. In fact, the drugmaker's shares were actually up by double digits early in March following an upbeat fourth-quarter earnings release and pipeline update. 

Researcher holding test tube

Image source: Getty Images.

So what

This monthly volatility shouldn't be too surprising for shareholders, however. Arena's ongoing managerial shake-up and pivot away from its FDA-approved anti-obesity drug Belviq, after all, have reverted the company into a developmental biotech without a late-stage candidate to hang its proverbial hat on. In other words, these kinds of price swings are fairly normal for small-cap clinical-stage biotechs like Arena that are years away from bringing a product to market.

Now what  

On the bright side, Arena's stock could start to stabilize sooner rather than later if its experimental pulmonary arterial hypertension (PAH) drug, ralinepag, hits the mark in its ongoing midstage trial. According to the company, ralinepag's midstage results should be revealed by the middle of this year, perhaps paving the way for a pivotal stage trial.

Ralinepag is a potentially best-in-class drug that could carve out a significant share of the multibillion dollar PAH market that's presently dominated by much larger pharmas like United Therapeutics and Johnson & Johnson.  

The catch, however, is that several experimental PAH drugs are presently under development by other companies -- most of which have far superior resources compared to Arena. Unfortunately, Arena's other midstage candidate, etrasimod, suffers from a similar problem. 

All told, Arena's decision to divest Belviq and move onto greener pastures probably was the right move based on the drug's tepid sales. But the company's subsequent decision to go big-game hunting in crowded markets like PAH may prove to be a particularly a tough road to travel when it comes to creating shareholder value.

10 stocks we like better than Arena Pharmaceuticals
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Arena Pharmaceuticals wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of April 3, 2017

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 4012664, ~/Articles/ArticleHandler.aspx, 4/29/2017 1:35:26 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
Change down DOW 20940.5 -40.8 -0.2%
Change down S&P 500 2384.2 -4.6 -0.2%
Change down NASD 6047.6 -1.3 0.0%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

4/28/2017 4:00 PM
ARNA $1.34 Down -0.04 -2.90%
Arena Pharmaceutic… CAPS Rating: **

Article registration testing

Revisit this page

Clear article's cache and revisit this page

Or, visit the current page, forcing Test ID to article:interrupt:106919 and

Tookie Value = 53398159460693656379874652257596