Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) Slides on Dilutive Share Offering

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) announced a public offering of their shares and the market responded by opening trading for ARNA 17% lower than yesterday’s closing price of $1.48. ARNA shares have withstood further decline and the inter-day high, so far, is $1.29 – higher than the opening price of $1.23. Over 20 million shares have traded which is over 13 times their normal daily average.

San Diego, CA-based Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) today announced that its public offering will be priced at $1.15 per share. ARNA shares closed at $1.48 yesterday. The offering will be for 60 million shares and hopes to raise $69 million before expenses. Citigroup and Leerink Partners will be the joint book-running mangers. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) will grant them a 30-day option on 9 million shares.

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) will use the net proceeds for drug development, general corporate expenditures, and capital expenditures. Arena has a strong pipeline with eight drug candidates in Phase 2 or later stages of development. Belviq and Belviq XR are weight control drugs developed by Arena and currently creating revenues in the market. The global commercial rights to these drugs was purchased by Eisai.

Dilution has not been too much of an issue for shareholders of Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) when compared to many other biopharmaceutical firms. In 2012 there were 196.52 million shares outstanding and that grew to 243.13 million by 2016. What may be of more concern is that the offering price of $1.15 is close to the minimum bid requirement set by the NASDAQ of $1.00. Often when shares drop below that threshold for 30 days they receive formal delisting notice unless they take corrective action.

YTD performance has been good. ARNA shares are up 4.23% for that period, but ARNA shares are down 20% for the year and 42% below their 52-week high of $2.16. They are only 6.5% above their 52-week low of $1.34. Given that the Relative Strength figure is 32.8, many technical specialists see more room to the downside than the upside. Investment firms have a wide range of opinion on Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). Two rate ARNA as a “Strong Buy”, two rate the shares as a “Hold”, and one rates them as an “Underperform”.

4/18/2017
Ticker Symbol ARNA
Last Price a/o 4:00 PM EST  $                      1.28
Average Volume                1,720,000
Market Cap (mlns)  $                  363.27
Sales (mlns)  $                  124.00
Shares Outstanding (mlns) 245.45
Share Float (mlns) 244.27
Shortable Yes
Optionable Yes
Inside Ownership 0.59%
Short Float 3.64%
Short Interest Ratio 5.17
Quarterly Return 4.23%
YTD Return 4.23%
Year Return -20.00%

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Marc has a degree in economics and a MSc. in Finance. Over his 20-year career, Marc has worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.

Author: Marcus Anderson

Marc has a degree in economics and a MSc. in Finance. Marc worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.

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