Arena Obesity Pill Approved, Good For All Fat-Fighters (ARNA, VVUS, OREX, AGN)

Arena Pharmaceuticals, Inc. (NASDAQ: ARNA) was halted today for news that the company’s weight-loss drug called BELVIQ has been approved.  The news is good for all obesity drug makers today.  VIVUS Inc. (NASDAQ: VVUS) is the top spot in obesity drugs according to Wall Street and the 9% gain to $28.78 today now generates a market value of $2.8 billion.  This marks a new 52-week high for VIVUS shares and more importantly it takes the stock close to its all-time highs all the way back to the 1990s.

Orexigen Therapeutics, Inc. (NASDAQ: OREX) is the most speculative of the three main weight loss drugs out there. That makes it the most volatile and that is why its shares are up a sharp 19% at $4.88 versus a 52-week high of $5.15 and versus a 52-week low of $1.22.

Arena has been extremely volatile lately.  Its shares were halted at 12:39:42 PM EST today and we are still awaiting a trade resumption time on the stock.

Many were debating whether or not Arena would in fact get FDA approval or not. If you don’t believe that, then why was the short interest at a high of at least a year?  The June 15 settlement short interest was almost 45.3 million shares.  The day to cover ratio of 2.17 is far from being a high but that is an absolute high on the nominal number of shares in the short interest.

The secondary or even tertiary question we would ask is simple… If a drug will lower obesity, will that lower the chances of Lap-Band surgeries?  If the drugs lower weight enough, maybe Allergan Inc. (NYSE: AGN) has a risk.  It is an outside and longer-term issue rather than something today but it is something we would at least consider watching ahead.

JON C. OGG