Why Arena Pharmaceuticals Shares Lost Weight

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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 fat-fighting pharmaceutical company Arena Pharmaceuticals  shed as much as 11% after the European equivalent to the U.S. Food and Drug Administration panel raised questions about the safety of its chronic weight management drug, Belviq.

So what: The Committee for Medicinal Products for Human Use, or CHMP, raised concerns over tumors in rats, valvulopathy, and psychiatric events. As noted by my Foolish colleague Keith Speights, the concerns regarding tumors in rats and valvulopathy were addressed in the CHMP's 180-day list of questions, but apparently not thoroughly enough for the panel's liking. Arena still expects a decision on approval or denial of Belviq in the first half of this year.


Now what: No soup for anybody... in Europe, that is! Today's caution flags don't preclude Belviq from being approved in Europe -- where rival VIVUS had Qsymia flat out denied -- but it does make the approval process even more difficult. Arena is really going to have to show the CHMP and European Medicines Agency that the slight variations in the side effects listed above are relative to placebo and far outweighed by the benefit of the drug. While I do think that's possible, I wouldn't rule out a rejection of Belviq in Europe in the near term. I still do stand by my personal assessment that Arena is the better of the two drug plays in the fat-busting sector and expect Belviq to gain approval internationally before VIVUS' Qsymia.

Craving more input? Start by adding Arena Pharmaceuticals to your free and personalized watchlist so you can keep up on the latest news with the company.

Which company will rake in fat profits?
The potential market for obesity drugs is massive, but so are the risks. If you're looking for more information on the top two obesity drug players, grab copies of our premium research reports on Arena Pharmaceuticals and VIVUS today. In the reports, our senior biotech analyst, Brian Orelli, Ph.D., breaks down each company's strengths and weaknesses, and explains the critical issues you need to know about. News in this space moves fast, so both reports come with a full year of updates. Click now for exclusive information on Arena and VIVUS.

The article Why Arena Pharmaceuticals Shares Lost Weight 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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