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The 1 Very Clear Reason Arena Pharmaceuticals, Inc. Skyrocketed 41% in July

What happened

Shares of Arena Pharmaceuticals (NASDAQ: ARNA), a biopharmaceutical company focused on the development of small-molecule drugs for the treatment of a variety of diseases, catapulted 41% during July, according to data from S&P Global Market Intelligence. The incredible surge in Arena's share price can be traced to the company's July 10 press release detailing its top-line results for a midstage study involving experimental drug ralinepag in patients with pulmonary arterial hypertension (PAH).

So what

As you can likely surmise by the 41% return shareholders were privy to in July, the phase 2 study involving ralinepag offered plenty of encouragement. The 61-patient phase 2 study demonstrated "a statistically significant absolute change from baseline in pulmonary vascular resistance (PVR) compared to placebo." It also showed a numerical improvement in six-minute walk distance. Overall, a 29.8% improvement in PVR was noted versus the placebo arm, and a 20.1% improvement relative to baseline. A statistically significant improvement in PVR was the primary efficacy endpoint of the study.

Image source: Getty Images.

Furthermore, the data showed that the safety profile of ralinepag was consistent with other prostacyclin treatments for the management of PAH, raising no warning flags with investors. The full study results are to be released at an upcoming scientific conference.

Nevertheless, the data was convincing enough that Executive VP and Chief Medical Officer Preston Klassen, M.D., had this to say: "It is exciting to see the positive nonclinical pharmacological profile translating into potentially the first oral prostacyclin therapy that may approach consistent therapeutic levels without the complexity of parenteral (IV) therapy. These data give us confidence to move expeditiously toward a Phase 3 clinical program."

Now what

Positive results from this midstage study are exactly the jolt in the arm shareholders needed after Arena threw in the towel on weight-loss drug Belviq earlier this year. Belviq was projected to verge on blockbuster sales status, but like other Food and Drug Administration (FDA)-approved weight-loss therapies, price and long-term use concerns worried consumers and physicians, limiting sales to just a fraction of their potential. Belviq was sold to Arena's marketing partner Eisai in January, leaving Arena looking for a fresh start. 

Image source: Getty images.

The data from ralinepag in midstage studies is encouraging, and while the PAH landscape has plenty of competition, the inherent pricing power advantages offered to U.S.-based drug companies should still allow Arena plenty of opportunities to generate positive cash flow and profits from a possible FDA approval in a few years' time.

Arena also has etrasimod and APD371 in development. Two years ago, etrasimod delivered positive phase 1b results in treating various types of autoimmune disease, while APD371 is an oral drug focused on treating Crohn's disease. APD371 targets the CB2 receptors of the cannabinoid receptor system in our bodies, and it's one of a number of CB-receptor-targeting or cannabinoid-based drugs aiming to potentially replace opioids as a pain management tool

Though Arena arguably has a lot going on clinically, it's also been consistently burning money for years. At this point, this Fool would prefer to see successful late-stage data in hand before even considering an investment in Arena.

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Sean Williams has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.