VIVUS, Inc. (VVUS), Arena Pharmaceuticals, Inc. (ARNA): Anti-Obesity Stocks Are Attractively Priced

The biggest concern about Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) actually stems from the less-than-impressive performance of VIVUS, Inc. (NASDAQ:VVUS)’s drug, which has led the market to believe that anti-obesity drugs might not become popular. I believe the market is overplaying the problems faced by VIVUS, Inc. (NASDAQ:VVUS), and the comparison is not fair. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) will not have the same hurdles VIVUS, Inc. (NASDAQ:VVUS) did, and the company will also have an experienced partner in Eisai. As a result, Belviq’s launch should be smoother and more effective than Vivus’s launch of Qsymia.

Again, I believe Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)’s stock has bottomed, giving investors a great opportunity to buy. At the current levels, there is a substantial upside potential in the stock. Once the revenues from the drug start flowing in, the stock will start its steady upward movement. Over the next six to eight months, Arena should be trading at least 30% above its current price.

Orexigen Therapeutics, Inc. (NASDAQ:OREX) is another player in the obesity sector; however, the company’s anti-obesity drug, Contrave, is still in the development stage. Orexigen will still take some time to enter the market, but it looks like the company won’t lose much due to the late entry. As I said above, the market is still developing, and it will take some time for patients to adopt these treatments.

The first-mover advantage has not gone to Vivus, which indicates that the market is valuing each drugmaker’s product on its merits.This already interesting market will become fascinating once all the players launch their drugs and start competing for market share. Orexigen Therapeutics, Inc. (NASDAQ:OREX)’s stock price will not see a big jump in the short-term, in my opinion.

Conclusion

Companies in the obesity market are fairly valued at the moment considering the performance of the products. However, the launch of new drugs and increased coverage from insurers can result in a substantial increase in revenues. As a result, the valuation for these companies will become extremely attractive. Arena and Vivus’s post-drug-approval price levels were extremely inflated, in my opinion; however, the current price levels have factored in all the subsequent events, and they represent a better value.

The article Anti-Obesity Stocks Are Attractively Priced originally appeared on Fool.com and is written by Ishtiaq Ahmed.

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