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Investing in the Lorcaserin drug: Black Sheep Trader - The Coiled Spring
One of the many secrets of Black Sheep Trader is the coiled spring pattern seen here with Arena Pharmaceuticals’ (ARNA) two-month consolidation pattern. But for patient investors upside may no longer be in question -- that is, if the obesity drug maker releases positive Phase III results for lorcaserin this month and wins over those critical of potential obesity drug-related heart valve damage.
Lorcaserin, for those of you unfamiliar, “selectively stimulates the 5-HT2C serotonin receptor, located in the part of the brain called the hypothalamus, which helps regulate satiety and influences metabolic rate. By preferentially targeting the 5-HT2C receptor […] patients effectively lose weight in a safe, well tolerated and efficacious manner,” according to the Arena site.
Other positives for Arena… More than 30% of Americans are obese as compared to 14.6% in 1971, according to the Centers for Disease Control and Prevention. Plus, the two other drugs currently approved to treat obesity reportedly have severe side effects and efficacy issues, which have limited drug sales. If Arena can conquer these problems, the $810 million company could have a billion-dollar blockbuster on its hands.
What we’re looking for is positive Phase III news, which could attract possible partnerships with the likes of Wyeth. While nothing is a guarantee, we have an $18 price target on the stock on positive news.
Ian L. Cooper,
Death Cross Trader
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