ARNA Chart

What: Shares of Arena Pharmaceuticals (NASDAQ:ARNA), a biopharmaceutical company primarily focused on developing drugs for weight control management purposes, slumped 17% in December, based on data from S&P Capital IQ, after a rival received a positive recommendation for its weight control drug in Europe.

So what: As it stands now there are three new weight control management drugs on the market in the U.S.: VIVUS' (NASDAQ:VVUS) Qsymia, Arena's Belviq, and Orexigen Therapeutics' (NASDAQ:OREX) Contrave, which was the most recently approved of the three.

Sales of Qsymia and Belviq haven't exactly impressed Wall Street thus far, so Wall Street's sales expectations for Contrave have been pretty tepid. However, Orexigen has two things going for it that Arena's shareholders currently don't.

Source: Arena Pharmaceuticals.

First, Orexigen has nearly completed an 8,900-person cardiovascular outcomes study known as the Light Study where interim data demonstrated that Contrave was safe if used over the long-term. Arena's Belviq doesn't have long-term safety data in place yet to make such claims, potentially giving Contrave an edge.

The bigger kick in the pants for Arena shareholders last month came from the Committee for Medicinal Products for Human Use in Europe recommending Mysimba (the brand name for Contrave in Europe) for approval. This is significant because Qsymia was turned away from approval in Europe, and Arena removed its application for approval in Europe before the CHMP could even render its decision. It would appear that Mysimba is on its way to an approval in the EU, thus leaving Belviq and Qsymia in the dust.

Now what: Put plainly, Arena Pharmaceuticals and Belviq have been a major disappointment, even with the assistance of skilled licensing partner Eisai.

If there is one thing working in Belviq's favor, it's that the drug has a very favorable safety profile relative to its peer Qsymia. With Belviq gaining acceptance with insurers and physicians likely preferring Belviq's safety record, I can see it outperforming Qsymia moving forward.

The big question is whether or not Orexigen will seize the reins and run away with the bulk of anti-obesity market share in the U.S. and in Europe. With few, if any, competitors in Europe that looks likely, but the U.S. market has proven to be wildly unpredictable when it comes to anti-obesity drugs.

Considering that Arena will likely burn through $50 million to $60 million in cash over the next few years, if not more, but still boasts a market value north of $700 million, I can't say I'm attracted to it here even after its sizable pullback. This is a company to consider only after it's dramatically cut its losses and cash outflow.