I anticipate that the next report on Nov. 15, covering the period ending Sept. 30, will show a further boost for Arena and further erosion in Vivus' institutional holdings for the reasons discussed presently.
I wrote about Arena's prospects for approval when the stock was around $2 and most Wall Street hedge funds and their analysts and journalists were saying lorcaserin (Belviq) would not get approved. My prediction that it would get approved was purely based on science and what I heard from several doctors who said Belviq is a good efficacious safe drug. It was also clear that Belviq may become a blockbuster as it is desperately needed for addressing the obesity pandemic.
As a result of the wrong call by Wall Street analysts and the institutions that follow them, institutional ownership in Arena was around 25% before approval. To match its peers I predict that number will go closer to 70%. The latest report shows an ownership of almost 32% so the trend is definitely as we predicted and I expect this trend to continue. Some of the reasons for this appetite are:
- Belviq's blockbuster potential and exponential sales, which could start as early as November.
- Prospects for a bidding war. Arena's CEO has indicated there's a lot of interest in Belviq by Big Pharma. Many believe a buyout will not happen under $40/share.
VVUS was downgraded by Jefferies Group from a Hold rating to an Underperform rating, and had its price target changed substantially from $31.00/share to $16.00/share.
The recent downgrade of Vivus, Inc. (VVUS) is sure to weigh heavily on the short-term performance of the company's stock. In this article, I'm not only going highlight the reasons why potential investors should look for alternatives, but also why Arena Pharmaceuticals (ARNA) is positioned much better in the sector.
VVUS opened trading at $20.95/share on Friday, Aug. 17, after it was reported that the company was downgraded by Jefferies Group from a Hold rating to an Underperform rating, and had its price target changed substantially from $31.00/share to $16.00/share. According to Thomas Wei, an analyst at Jefferies:
We are sooooo goiing to be rewarded. The Smart ones hold til this stock startts selling and goes thru the roof.