My thoughts on ARNA:
Lorcaserin will probably be approved, but in spite of the 18-4 vote, it is not a sure thing. ARNA was slammed in their previous advisory meeting a couple of years ago, and the FDA has been extremely reluctant to approve any drug for obesity. But, as I said, the odds are in its favor for approval.
After approval, I think there will be a decent pop, but I'm not convinced it will be huge, or if it will be, I doubt it will be sustained. I say this for a couple of reasons. First and foremost, ARNA needs cash. The S-8 they filed last week is a huge indicator that if Lorcaserin is approved, significant dilution will occur to raise that cash. (And the interested parties can purchase shares in the $8 range.) Secondly, I doubt an approval will come without significant requirements; namely, more long-term testing on Lorcaserin's safety profile. That ain't cheap to do. Thirdly, if you read the adcom notes for both ARNA and VVUS, you'll see that the committee clearly preferred VVUS, and if you look at the data, VVUS has the superior drug in terms of efficacy. (This isn't a VVUS pump; I highly doubt it's going to continue its meteoric rise given where the stock price is right now.) So between the fact that two new obesity drugs will likely be on the market at the same time, and that VVUS's drug will clearly cut into ARNA's profit (and the odds are that it will be significant), the dreams of massive profit margins are just that--dreams. Finally, and I speak from having been first invested in ARNA over two years ago, the management sucks. At the last advisory meeting two years ago, Lorcaserin was slammed because of test data on rats. Management conveniently failed to share this data with its investors because in their words, "We didn't think the data mattered," so the first time investors learned of it was at that advisory meeting. Management also conveniently raised a lot of cash before that FDA advisory meeting. In my opinion, that's rather shady, and unfortunately all too common in the small biotech industry.
So what I'm saying is this: I think the wise man will sell after the pop, or shortly thereafter. I don't see this as being a longterm hold. Take it for what it's worth, but I have been playing micro-cap and small-cap biotechs for four years now.
