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VVUS and ARNA

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By Pharmboy at Phil's Stock World

Excerpt from Stock World Weekly, Tightening the Screws

I expect the market to continue pulling back. But biotechs should mostly hold their ground. There are a few catalysts coming up, including with the companies Vivus and Arena. Both companies have been focusing on the obesity market. VVUS has Qnexa (a combination pill of phentermine and topiramate) and ARNA has Lorqess (a novel 5-HT2c receptor agonist).

Catalyst 1 – Vivus's stock (VVUS, $22.53) rocketed up on the PDUFA thumbs up (PDUFA = Prescription Drug User Fee Act – a group of doctors and experts meet to express their opinion about a drug). The FDA usually follows the experts’ recommendation, but not always. The FDA has yet to rule. A ruling should happen on or before April 17, 2012.

For VVUS, I like playing for a failure, as the risks to me outweigh any benefits. A very conservative GAMBLE is buying an April 2012 $20/$19 bull put spread for $0.30 or less.

Catalyst 2 – Arena (ARNA, $3.07) had a strong run from the $1.20 range, and now trades at $3.

ARNA has a PDUFA date set for June 27, 2012. If VVUS gets approval, ARNA should fair well. If VVUS is rejected, ARNA still has a chance to do well due to its drug having a different mechanism, as well as due to the patent life on its molecule.

For ARNA, I like playing a July 2012 $2.50/$3.50 bull call spread for $0.35 or less. 

Trades on these companies are all- or- none scenarios – i.e., RISKY.

 


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