Why Arena Pharmaceuticals Shares Soared

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 surged 17% today after expanding its marketing deal with Japanese drug maker Eisai for its obesity drug Belviq.

So what: Under the agreement, Eisai will give Arena an upfront payment of $60 million and milestone payments of up to $176.5 million for the rights to market Belviq in all countries worldwide (except South Korea, Taiwan, Australia, Israel, and New Zealand), reigniting optimism over the drug's adoption trajectory. Additionally, Arena will receive up to about 36% of Eisai's net sales on the drug based on certain conditions, suggesting that Arena's top line is starting to pick up steam after Belviq's disappointing launch.

Now what: Eisai also announced plans to double Belviq's U.S. sales force to 400 reps by this December.

"Additional work is needed to continue building the weight management market, and we are pleased with Eisai's commitment to realizing the medical and commercial potential of BELVIQ," said Arena CEO Jack Lief. "We look forward to the market growth of this important treatment option as we move into 2014."

So while Arena might still be too speculative for average investors, today's positive news, coupled with the fact that the shares remain well off their 52-week highs, make the stock an interesting pick for biotech experts.

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

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