Disappointing 10-Q Numbers Push Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) Down On The Charts

[[tagnumber 0]][[tagnumber 1]]The last few weeks have been shaping up as a real nightmare for investors tracking the chart performance of Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). The reason: over the last three and a half weeks, ARNA shares have wiped a whopping 44 percent off their market value. As a result, ARNA is currently traded around the $2.70 per share mark and there is little to suggest a rebound any time soon.[[tagnumber 2]] [[tagnumber 0]]It all started in mid–July when you could still get a stake in ARNA at $4.60 per share. While the latter sounds much better than the stock‘s current quote, it is also well below the 52–week high of $6.28/share reached in early–January this year. Back then, the stock jumped high on positive clinical data from an early–stage trial of its ADP334, a drug candidate for treating autoimmune diseases. The company then missed analysts‘ Q4 expectations in early–May and has since been on the decline. However, the biggest slump occurred this month following the publication of the company‘s Q2 report. The latter showed two main implications: a/ revenues have decreased as compared to Q1 and b/ expenses have shot up over the same period. Needless to say, it all led to a hefty loss of almost $27 million.[[tagnumber 2]] [[tagnumber 0]][[tagnumber 6]]The main factor behind ARNA‘s slide on the charts is most likely linked to the fact that it has been three years since the biotech developer of novel drugs for unmet medical needs got an FDA approval for its Belviq drug. The latter is meant to deal with chronic weight problems in adults. And while there is no denying that the company is raking in millions of revenue thanks to Belviq, this revenue is by far not sufficient to cover ARNA‘s R&D costs, let alone all its expenses. As a result, ARNA‘s net loss for the last four quarters on record has averaged a whopping $23 million, or 2.5 times higher than the average top line.[[tagnumber 2]] [[tagnumber 0]]That ARNA has been unable to break even now that it has had a marketable product for a while implies that new revenue sources must be found. Given Arena‘s biotech background, this means developing new drugs that have the potential to get an FDA clearance and prove so efficient that medical centers start using it en masse. To achieve this, ARNA will most certainly have to splash out millions of dollars on clinical trials for the next few years at least. Unless Belviq‘s sales explode in the meantime, one could safely assume that ARNA‘s chances of becoming profitable in the short term are slim at best.[[tagnumber 2]] [[tagnumber 0]]In this respect, it is no wonder that investors are currently holding a huge short interest in the stock as the number of shorted shares vastly outnumbers the average volume. Considering that ARNA shares are now heavily oversold (with an RSI of 24.63), shorters might have trouble covering their positions should a minor rebound occur to push the stock out of the oversold area. The same goes for prospective shorters, as well.[[tagnumber 2]]