2-Star Stocks Poised to Plunge: Arena Pharmaceuticals?

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, clinical-stage biotechnology company Arena Pharmaceuticals (NAS: ARNA) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Arena's business and see what CAPS investors are saying about the stock right now.

Arena facts

Headquarters (founded)San Diego, Calif. (1997)
Market Cap$499.8 million
IndustryBiotechnology
Trailing-12-Month Revenue$11 million
ManagementCo-Founder/Chairman/CEO Dr. Jack Lief
Co-Founder/Chief Scientific Officer Dominic Behan
Return on Capital (average, past 3 years)(33.4%)
Cash/Debt$88.2 million / $87.8 million
CompetitorsGlaxoSmithKline
Orexigen Therapeutics
VIVUS

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 9% of the 689 members who have rated Arena believe the stock will underperform the S&P 500 going forward.

Just yesterday, one of those bears, biotech expert zzlangerhans, offered a couple of reasons to bet against the approval of Arena's obesity drug lorcaserin:

One is that while the actual meeting doesn't take place until May 10, the FDA will release briefing documents on May 8. I think while the committee vote is a toss-up, the briefing documents are much more likely to be negative and drive the share price downward. ...

The second reason is that I want to be on [Adam Feuerstein's] side of this call. While his detractors endlessly point to the same incorrect or partially incorrect calls after years have passed, Feuerstein has continued make confident predictions the vast majority of which prove to be accurate. Some recent beauties are the abject failure and impending bankruptcy of Radient Pharmaceuticals, the downward trajectory of Biosante, and of course the negative result of the phase III trial of perifosine for Keryx and Aeterna Zentaris.

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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of GlaxoSmithKline. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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