Arena Volume Spike Highlights Weight Loss Sector Again, Volatility To Continue (ARNA, VVUS, OREX)

We are tracking and analyzing a significant volume spike in shares of Arena Pharmaceuticals, Inc. (NASDAQ: ARNA) today.  Shares are up nearly 5% at $8.25 and the 12:30 PM trading volume is now over 40 million shares.  Trading has been elevated and we are within about two weeks of a key FDA decision on its controversial weight-loss drug.  The 39.7 million shares short interest (as of May 31) is also going to create some added volatility around this stock.

Keep in mind that the moves here also will highlight VIVUS Inc. (NASDAQ: VVUS) as its Qnexa is supposed to most valuable of the three weight-loss drug candidates if you include VIVUS, Arena, and Orexigen Therapeutics, Inc. (NASDAQ: OREX).  VIVUS is up over 2% and Orexigen is up almost 7% today.

The 12:30 PM EST snapshot of options trading volume in Arena pretty much sums this up entirely (by strike, contract volumes, and the open interest):

JUNE-2012 EXPIRATIONS:

CALL Vol.  OpInt

6.00 1,329 7,593

7.00 3,498 12,581

8.00 5,727 8,552

9.00 5,494 2,195

10.00 1,035 927

PUT$ Vol.  OpInt

7.00 3,862 2,480

8.00 4,178 792

JULY-2012 EXPIRATIONS:

CALL Vol.  OpInt

6.00 1,228 13,899

7.00 2,768 43,679

8.00 4,581 18,322

9.00 2,582 7,962

10.00 3,415 9,487

11.00 1,296 2,535

12.00 1,463 4,562

13.00 440   2,014

14.00 2,963 7,161

PUT$ Vol.  OpInt

5.00 1,180 4,061

5.50 431   4,511

6.00 2,360 15,869

7.00 2,850 2,466

8.00 1,062 322

Keep in mind that the Arena short interest peaked at 44.6 million shares as of the April 30 settlement date.

The most recent data from FactSet shows: Arena has ten analysts covering the stock and the consensus is between an Overweight and Hold rating but closer to an Overweight rating. VIVUS has 14 analysts covering it and the consensus is an overweight rating. Thomson Reuters has a consensus price target of $6.88 on Arena and $30.18 on VIVUS.

JON C. OGG