Local drugmaker Arena Pharmaceuticals plans to conduct a reverse stock split in an attempt to salvage some shareholder value, the company announced Wednesday.
The move is another sign that the company is undergoing a financial makeover. The stock split will essentially consolidate 10 shares into one.
Reverse stock splits are often seen as negative corporate actions. That’s because they are a tactic often used by companies that have seen their share prices fall into the $1 range and, therefore, run the risk of being delisted from stock exchanges that have minimum share price rules.
At close of market Wednesday, Arena’s stock was trading at $1.35 per share.
"We started last year with a charter to reset Arena,” said Amit Munshi, president and CEO of Arena. “This reverse stock split is another step toward driving long-term shareholder value.”
The company, best known for making the weight loss drug Belviq, has been making changes to rebound its financial situation. For example, the company unloaded Belviq onto its partner Eisai Co., which Arena expects will lower the company’s clinical costs by $80 million over the next three years.