Arena Pharmaceuticals (ARNA) - FDA advisory panel meeting aftermath

Panel Vote
As expected, the FDA once again dished out a curve ball at the advisory meeting to a seemingly promising drug.  In total, out of 14 medical experts, 9 voted yes and 5 voted no for recommendation of Arena Pharmaceuticals' weight management drug, Lorcaserin.  This is yet another disappointing ending to a biotech firm seeking to break into the billion-dollar industry of weight control, following Vivus Inc.'s failure two months ago with its candidate, Qnexa, which was recommended against due to a number of safety concerns.

Sunken stock
The outcome sent ARNA stock crashing down, amassing a total of over 70% slash since the release of panel meeting notes.  This speaks to the power of biotech trading, which can turn heaven into hell in a matter of days.  So, what now?  Arena Pharmaceuticals' shares, once more than tripled in a month and a half, are now flattened by once hopeful investors.

Now what?!
After what we've seen with VVUS and ARNA, is this the end of the pursuit of the almighty FDA-approved diet pill?  Well, not so fast.  Just a reminder, information forwarded from the advisory panel to the FDA does not necessarily have to be followed by the drug regulator.  In other words, the FDA may come out and approve either one (or both) of VVUS' and ARNA's candidates despite the negative recommendation.  While the likelihood of that is slim, it is certainly not zero.  Keeping this in mind, one might choose the option of picking up cheap shares of both of these companies (especially ARNA) in hopes to see an incredible bounce back in the future, as near as Oct 28, 2010 for VVUS and Oct 22, 2010 for ARNA (PDUFAs).  VVUS has already recovered ~12% from the post-panel trough and there's still room to climb before the PDUFA.  Similarly, ARNA may follow suit and rebound from the horrific sell-off, presenting a way to make back some cash for head spinning investors.

A thin string of hope

As mentioned, selected medical experts will be assessing the marketability of Orexigenics Therapeutics' (OREX) diet therapy, Contrave, on Dec 17, 2010.  This will be an interesting timing as the industry will have seen the outcome of the FDA's final call on VVUS and ARNA's drugs.  Approved or rejected, the news will dramatically dictate OREX's fate and time will only tell which of these three companies will come out on top in this battle over the massive obesity market.  Fascinatingly, post release of panelmeeting notes/announcement of ARNA's panel result, OREX has already made an incredible 45% run in three trading sessions.  

At the moment, OREX is sitting just above the $6 mark.  Will it climb higher?  I certainly think so.  Look at ARNA.  After negative review of VVUS' Qnexa by the FDA, ARNA's shares surged ~86% in two weeks.
 
Are we going to see the same for OREX in the following two weeks?  We shall see!