Arena Pharmaceuticals (ARNA), which soared over 10% in Monday morning trading, has set a new 52-week high of $6.75. Over the past month, Arena signed a licensing deal for its potential weight-loss drug, lorcaserin, with Japan's Eisai; released study results for the drug; and got a boost from a decision by a Food and Drug Administration panel on rival's Vivus (VVUS) drug. Arena's shares have more than doubled during that time.

The Eisai licensing deal is potentially worth about $1.3 billion. Meanwhile, the study results Arena released showed lorcaserin helped nearly half the patients lose 5% of their weight and improved their chances of keeping it off. Arena's drug did that while exhibiting a safer safety profile than either of its competitors' treatments: Vivus's Qnexa and Orexigen's (OREX) Contrave.

Merck & Co. (NYSE: MRK), like its pharmaceutical competitors, has seen better days. A raft of patent protection expirations, bad PR, concerns over health risks for many of its drugs, and a lack of pipeline products, have all combined to stomp on one of the largest pharmaceutical firms in the world. Is the future brighter? Possibly, but there's a lot of risk to go with it.

Merck says that it will continue to develop experimental drugs for cholesterol and obesity [subscription required]. Nothing new there, as those two health conditions are increasing in numbers in the U.S. (obesity in particular). But Merck will be developing new drugs in these areas where the competition has miserably failed in the recent past due to safety problems.

What can Merck do to ensure its efforts to not meet the same fate? That is a question without a clear answer, although stakeholders long in MRK shares should be asking that question right now. It doesn't have the best track record, with the Vioxx lawsuit mess and strong competition for one of its most popular blockbuster drugs, the Zocor cholesterol product.

Merck, embracing some recent science, believes that raising good cholesterol could reduce the risk of heart problems beyond what can be accomplished by existing statin drugs (and let's hope they are right). Statin drugs work by lowering bad cholesterol, and although the approach works for many, it's not the best route according to many medical experts.