Why Arena Pharmaceuticals Shares Jumped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotechnology company Arena Pharmaceuticals (NAS: ARNA) rose as much as 14% on rumors that it could be a takeover target by a larger pharmaceutical company.

So what: According to a report by MarketWatch, Arena's shares were rising due to an unconfirmed rumor that there may be interest in purchasing the biotech company. Arena received approval for diet drug Belviq last month -- the first FDA-approved obesity treatment in more than a decade.


Now what: It isn't a stretch to assume that a big pharmaceutical company could be interested in Arena. About one-third of the U.S. population is overweight, so the implications of a diet drug when coupled with a diet could lead to multibillion-dollar possibilities.

It will not, however, be a cakewalk for Arena. For one, Belviq still needs to be successfully launched. As we've witnessed from multiple biotechs recently, launching a new drug successfully is almost as difficult as getting it approved in the first place. There's also VIVUS (NAS: VVUS) , which received FDA approval for Qsymia (formerly Qnexa) as well. Arena would probably be very smart to ally itself with a company that has deep pockets and has a strong history of marketing new drugs, but I'd refrain from buying too willy-nilly into these as-of-now-unconfirmed rumors.

If you want the scoop from our analysts on what opportunities and pitfalls await Arena, then you have to get your copy of our latest premium research report on Arena Pharmaceuticals. Complete with a year's worth of updates, this research report will give you the investing edge you need! Click here to get your copy.

The article Why Arena Pharmaceuticals Shares Jumped originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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