Arena's Obesity Drug Safe for Trial

The Street's Take

Analysts at Merrill Lynch and UBS now have a price target of $22 for Arena, and Leerink Swann raised its target to $21 from $16, saying the event lowers the program's risk profile. Looking ahead, Leerink Swann noted, "Based on previous clinical data with fenfluramine/phentermine, we believe [that with] a favorable safety review at 12 months, the program would be largely de-risked, at least from a safety perspective."

The 12-month review will take place in the first quarter of 2008. Also, Arena is in discussions with the FDA to finalize protocols for two additional phase III pivotal trials scheduled to begin later this year. These studies are expected to evaluate daily doses of 20 milligrams and 10 milligrams vs. placebo over a one-year treatment period, with one of the trials evaluating patients with type II diabetes.

Arena gained in premarket trading Tuesday after the news was announced and then slid throughout the day as some investors sold, likely taking advantage of the higher price. Shares were down 68 cents, or about 5%, at $13.35 in recent trading.