Heron Therapeutics (NASDAQ: HRTX) and Arena Pharmaceuticals (NASDAQ:ARNA) are both small-cap medical companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, dividends, risk, profitability, institutional ownership and earnings.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Heron Therapeutics and Arena Pharmaceuticals, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Heron Therapeutics 0 0 10 0 3.00
Arena Pharmaceuticals 0 2 5 0 2.71

Heron Therapeutics currently has a consensus price target of $33.13, suggesting a potential upside of 115.10%. Arena Pharmaceuticals has a consensus price target of $38.83, suggesting a potential upside of 91.67%. Given Heron Therapeutics’ stronger consensus rating and higher possible upside, equities analysts plainly believe Heron Therapeutics is more favorable than Arena Pharmaceuticals.

Risk & Volatility

Heron Therapeutics has a beta of 2.07, meaning that its share price is 107% more volatile than the S&P 500. Comparatively, Arena Pharmaceuticals has a beta of 1.39, meaning that its share price is 39% more volatile than the S&P 500.

Profitability

This table compares Heron Therapeutics and Arena Pharmaceuticals’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Heron Therapeutics N/A -451.80% -152.23%
Arena Pharmaceuticals -16.27% -49.87% -10.82%

Earnings and Valuation

This table compares Heron Therapeutics and Arena Pharmaceuticals’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Heron Therapeutics N/A N/A N/A ($4.26) -3.62
Arena Pharmaceuticals $117.73 million 6.75 $16.71 million ($0.57) -35.54

Arena Pharmaceuticals has higher revenue and earnings than Heron Therapeutics. Arena Pharmaceuticals is trading at a lower price-to-earnings ratio than Heron Therapeutics, indicating that it is currently the more affordable of the two stocks.

Summary

Heron Therapeutics beats Arena Pharmaceuticals on 5 of the 9 factors compared between the two stocks.

About Heron Therapeutics

Heron Therapeutics, Inc. is a biotechnology company engaged in developing pharmaceutical products for patients suffering from cancer or pain. The Company’s product candidates include SUSTOL, HTX-019 and HTX-011. All of its product candidates utilize science and technology platforms, including its Biochronomer drug delivery technology. The Company’s SUSTOL (granisetron) injection, extended release is being developed for the prevention of both acute and delayed chemotherapy-induced nausea and vomiting (CINV) associated with moderately emetogenic chemotherapy (MEC) or highly emetogenic chemotherapy (HEC). HTX-019, which is an intravenous formulation of aprepitant, a neurokinin-1 (NK1) receptor antagonist, is being developed for the prevention of CINV. HTX-011, a long-acting formulation of the local anesthetic bupivacaine in a fixed-dose combination with the anti-inflammatory meloxicam, is being developed for the prevention of post-operative pain. HTX-011 is in Phase II clinical trials.

About Arena Pharmaceuticals

Arena Pharmaceuticals, Inc. is a biopharmaceutical company. The Company is focused on developing small molecule drugs across a range of therapeutic areas. The Company has three primary investigational clinical programs: etrasimod (APD334) in Phase II evaluation for ulcerative colitis, APD371 entering Phase II evaluation for the treatment of pain associated with Crohn’s disease, and ralinepag (APD811) in Phase II evaluation for pulmonary arterial hypertension (PAH). The Company’s drug, Lorcaserin, is approved for marketing in the United States and South Korea for the indication of weight management. The Company’s drug candidates in clinical development include APD334 for autoimmune diseases, ralinepag for vascular diseases and APD371 for pain. The Company’s programs under collaboration include nelotanserin for dementia-associated psychosis, temanogrel for thrombotic diseases, and an undisclosed orphan GPCR for central nervous system (CNS) indication(s).

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