Out of the Gate: Arena Pharma Rises

After the closing bell Monday, Arena said its partner Ortho-McNeil Pharmaceutical Inc., had placed development of APD668 on hold after examining results from a two-week trial of the drug. Instead, the companies will focus on developing a similar diabetes drug candidate that may be more potent.

Shares added 22 cents, or 3 percent, to $7.48 in morning trading. The stock hit an annual low of $7.02 on Friday.

Ortho-McNeil, a unit of Johnson & Johnson, works with Arena to develop drugs that are designed to treat type 2 diabetes by stimulating insulin production.

Morgan Joseph analyst Eugene Trogan kept a "Buy" rating on Arena shares, with an $18 price target. He said Ortho-McNeil chose not to terminate the partnership, which shows drugs like APD668 can be effective against diabetes.

"Though yesterday's announcement, in our view, represents somewhat of setback, nevertheless, the partnership remains strong," he said.