Business Week noted Arena Pharmaceuticals Inc. (NASDAQ:ARNA) as one of its three weekly stock picks this morning and frankly it was the only pick with any make noise to it. Arena Pharmaceuticals ordain have a safety analyse of Lorcaserin its lead drug candidate in arrange III for obesity next month. Business Week referred to two different reports. It said that Fortisnotes that it could be a multi-billion medicate hence their $25 aim. Needham also has a $23.00 target although this medicate may not hitshelves until 2010.
As far as when that safety analyse is in September is not yet known and has not been formally set. I contacted David Walsey. Director of Corporate Communications at Arena by telecommunicate this morning and he confirmed. "As of now no formal date has been set but past guidance in the conference call is an indication for the month of September."
We wanted to see what have options trading signals as far as price expectations and current trading activity ahead of the event. We are including September have options because the go out is currently unspecified but the bulk of the trading activity so far is for the October month option expirations. For starters. Arena's stock closed at $12.50 yesterday and have traded over $13.00 mid-morning.
The SEPT-2007 options are not that active with that month having a September 21. 2007 expiration go out and some traders might not believe that the safety review ordain hit before then. The September $12.50 Calls and $15.00 Calls have a small open interest with 1,285 contracts and 1,847 contracts listed in the change state interest respectively. But based upon current prices it appears that options traders today peg only a $1.20 move based upon the safety analyse. Traders should really rely the October expiration month for a clearer conceive of.
more forthcoming: the $12.50 calls and the $15.00 calls each displace 5,788 and 6,641 contracts respectively in the open interest. Combined that only represents 1.23 million shares on a fully leveraged basis and the company trades 1 million shares or more on an average day. When we look at the October contracts the determine movement expectations we get a range of a range of up to $2.75 to $3.45 depending on which assure you use. The put options for the $12.50 and $10.00 PUTS also undergo a combined change state interest of 11,700 contracts and those determine indications are somewhat in the same range.
We won't make calculations out to January. 2008 contracts but the open interest is change surface larger for the closest label and higher options there. Keep in mind that these 'option price indications' can displace wildly and change surface though there is much time value these can go up and down based solely on options traders making price and risk adjustments. Those figures are also based on a snapshot of mid-morning prices on a static basis rather than on a dynamic pricing copy taking all historic trades and all touch prices into consideration. With many investors being on vacation and half of protect Street out all or most of next week it's probably safe to go ahead and alter a forecast that this options trading activity and the open interest ordain increase considerably going into September. With an $800 million merchandise cap and some calling for this to be a blockbuster drug. Arena will probably garner a lot more outside touch coverage ahead of and going into this event as come up.
Lorcaserin. Arena's orally administered internally discovered medicate candidate for the treatment of obesity is in an ongoing Phase 3 schedule. The increase stimulates the 5-HT2C serotonin receptor located in the hypothalamus an area of the brain which helps adjust satiety and influences metabolic rate. Results from a arrange 2 study demonstrated that treatment with lorcaserin produced highly statistically significant progressive and dose- dependent charge loss over a 12-week period. In the chew over which excluded fast and exercise patients taking a daily 20 mg dose of lorcaserin realized a mean charge loss of 7.9 pounds while patients on placebo lost less than one pound. Lorcaserin was generally well tolerated at all doses and had no apparent effects on heart valves or pulmonary artery pressure.
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