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Executives

Michael Narachi - President & CEO

Analysts

Orexigen Therapeutics (OREX) Credit Suisse Group AG Healthcare Conference November 15, 2012 3:30 PM ET

Operator

Unidentified Analyst

Thanks everyone for attending the next session is Orexigen. I’m (inaudible) a member of the Biotech team here at Credit Suisse. Here to talk about Orexigen is Michael Narachi as everyone knows, company is in late stage development of a product called Contrave partnered with Takeda and we should see some data on the cardiovascular outcome trial pretty sure. Sure Michael we talk about that and other things in a better Orexigen. Go ahead.

Michael Narachi

Thanks Lee. Thanks for your interest. Looks like we have a relatively small group here so assume that there are some familiarity with the story and move through quickly and then if people have questions that could be interesting during the breakout. I’ll be making the usual forward-looking statements. Things do change in our industry as you know quite a bit from time to time all of the filings about risk factors et cetera can be found on our website and in our SEC documents.

I feel that we’re poised right now to deliver with Contrave in the obesity space just a general broad view. We have gained incredible regulatory clarity on what it will take for Contrave to be approved by virtue of the Light Study which is currently been conducted. I’ll talk a bit about that in that presentation and we feel the probability of success of the Light Study is high and I will go through the specifics of why we think that’s true. It's a large safety outcomes trial. The market place we don’t need much background on how large it is and that it's growing. Unfortunately the unmet need is high; there is very limited competition or promotion in this space today. We believe Contrave has a favorable and differentiated product profile and probably most importantly in-light of recent events in this space. We do have already a large scale commercial partner for commercialization in North America and we would be seeking a similarly skilled partner for the rest of the world as a commercialization partner for Contrave.

We filed a complete application for approval with the FDA quite some time ago now, our PDUFA date was February of 2011, we received a CRL that identified a single approval deficiency. It was solely focused on theoretical cardiovascular risk and the need to rule out excess risk in a preapproval double-blind randomized outcomes trial. There were no approval deficiency cited, the rest of the CRL was more administrative some drug-drug interaction requirements, some small post-marketing requirement studies et cetera. So the really the only issue that we had to sort out was the exclusion of excess cardiovascular risk. It was ill-defined and ambiguous which led to trying time for the company where over a nine month period of time through a formal dispute resolution process where we escalated our appeal through the hierarchies at the FDA to get clarity on exactly what it would take to rule out that risk and as it turns out it's a very similar almost identical paradigm to all diabetes drugs where certain amount of risk needs to be excluded prior to approval then you can put an interim look at data and you complete the study and check for further decrease rolling out excess risk at the final analysis post approval.

Protocol that we got is based on guidance written guidance from the Director of the Office of New Drugs at FDA and then we gained top and bottom alignment by also agreeing to the specifics of the protocol and special protocol assessment with the review division. Basically what we need to do is rule out excess risk a doubling of risk to get on the market and rule out a 40% increase in risk in a post-approval setting at the conclusion of the trial.

The last point in the slide it points out something that recently occurred, we went back to the FDA and asked is there a further efficiency we can gain with the data and we ended up agreeing at the center level with Dr. Throckmorton that we could resubmit the NDA prior to getting the data from the Light Study and then supplement if you will or add the data during the typical six month resubmission Type 2 PDUFA clock. So we will submit an NDA sometime next year when we have confidence that we will have the data sometime during the review and then we will add that data.

The details of that are still getting worked out with the review division. We should expect further clarity on that same. The Light Study itself is study conduct that pace in enrollment is going excellent, far faster than we expected. We did many innovative things to rapidly enroll this trial and you can see from the expectations on the blue line versus the results that we delivered for the trial executions gone incredibly well. We now expect to have completed enrollment this year with some where close to 9000 patients randomized. Then those patients stay in the trial and as we observe them, we are observing them really up for only one thing cardiovascular events, heart attack, stroke and CV death. Those are the combined end points for the study.

But once they are in the trial events have already been accumulating but and then just go forward and we observe them in a double line randomized way. They entered the trial and enroll into a run-in period if you will for two weeks and in that two weeks the main thing that happens is we shake out people who really don’t want to be in a long term clinical trial.

So it improves the efficiency of randomized patient once they come in and then get randomized either Contrave or placebo really importantly then this study, the FDA allowed us to go 16 weeks into the trial and access a patient for therapeutic effect. If they have not lost weight they come offline to study drug and so then they are still followed for an event but only responders are going to be exposed a study drug for any long duration of time.

So that further increases our confidence of success in the trial, we are getting to test safety in a real world setting where only responders are on drug so there is the possibility of a balance between the benefit of weight loss than any potential theoretical risk. So that again as I said increases our confidence in the outcome of the trial.

So everyone counts, every event counts, once you randomize and the intent to treat analysis regardless of how much drop out there is during the study. The probability of success is high, we think that strengthened by the fact that in 25 years of marketing of bupropion that’s the drug that caused a theoretical risk, it's a symptomatic, it causes a slight increase in heart rate and blood pressure and benign background. If you lose weight on Contrave your blood pressure drops from baseline but it's still slightly elevated over a placebo matched cohort. About 2 millimeters of mercury or 1 or 2 beats per minute in heart rate. So that’s theoretical risk signal that drove the requirement for the cardiovascular risk assessment but in 25 years no one has ever picked up a signal of excess risk for bupropion whether that be in large observational studies or our integration of (inaudible) databases.

If you model all of the laboratory changes and body mass and other changes in a patient, you show a decrease in risk for people on our Phase III trial not an increase in risk and again the focus on responders further strengthens our confidence in the outcome of the trial.

Though we targeted a group of patients who are on label patients but at the high end risk of the spectrum. So we didn’t want to get a whole bunch of people who aren’t going to have events in the trial so we primarily did that with an age cut off where we are only taking women who are over 50 and men who are over 45 and they have to have some risk factors either a history of cardiovascular disease or diabetes plus a risk factor too. You can see the target population in the column on the left and the actual enrolled population as of a month or so ago and we’re right on target with what’s what you expect which should give us an event rate of around 1.5% per year in the background rate.

If you model the exposure time in the study with either 1% or 2% event rate, 1.5 which is depicted by the star in the center of this bar that’s about when you would expect to have the 87th May Summit which is how many events we need to statically role out the upper bound of a 95% competence interval of 2.0. So if this goes according to the model about the middle of next year we will have 87 events will then adjudicate out the final events through the data analysis and add it to a submission we will have made a few months before that.

Switching now to commercial focus and this also spans clinical. This is a rate loss distribution curve that’s illustrative and it actually is from one of our Phase III trials but it's typical of loss program whether that be program without therapy or a device or drug. The proportion of patients that lose weight is shown on the right and on the left a small number of patient actually gain weight most of these programs and the center one is the main in the median on the population basis so when we have seen over the last two years placebo subtracted means of weight loss studies they are not very impressive. Placebo subtracted means take the middle of this graph and a middle of a placebo graph and subtract them what really matters to almost all drugs is we want the promise of a responder but if you focus on the responders on the right hand side of the curve and say hey maybe half the people are going to have a good response, the third of them are going to have a great response and that’s what drives people I think to take a therapeutic trial and that’s what we propose for labeling, put people on the drug, wait 16 weeks, do an assessment. If they have hit 5% or more weight loss by week 16 go forward if not trying something else.

So, in that paradigm in an open label setting you get a nice high proportion of responders, and you will get a lot of weight loss. This is a pie chart that shows proportions of patients who lose and these are 220 pound woman on average in this study and you can see about a quarter of them are losing over 40 pounds, a quarter of them are losing over 34 pounds on average and so nice big proportions of patients that are getting really market meaningful weight loss.

Cardiometabolic Parameters all move in the right direction, you can see in the first cloud in the left that all the risk factors are moving in the right direction but on the bottom there you can see that heart rate is slightly elevated over base line for Contrave and the blood pressure is signaled although lower than baseline it's not as low as it would if you lose weight with just diet and exercise along, again it's couple of millimeters higher. So again that’s the risk factor that we are ruling out. A risk engine model shows that the Contrave responders on the right do far better than placebo for those Phase III trials and Contrave have intended in the middle still does better than placebo.

Commercially the market is growing everywhere but importantly it's growing in emerging markets which makes us an attractive opportunity for a pharmaco who is got a portfolio, expands in the Latin America and Asia. There is a lot of growth in this market unfortunately in a lots of the important growth engines for pharma.

Type 2 diabetes is one of the most prevalent core morbidities almost all the Type 2 diabetics in America have core morbid obese that’s a great target to focus on. Market growth we believe the market can grow 3 to 5 times in total prescription volume over the next 3 to 5 years particularly driven by the introduction of new weight loss therapies. This is not an unreasonable amount of final penetration in the market and it's also many, many markets have grown that much with introduction in new therapies. We list a few here with (inaudible) PPI, BPH drugs, overactive bladder drugs, lots of drugs have grown this kind of expansion as have past introductions of obesity therapeutics like Redux and Orlistat. The total penetration of the market grew that much is still very, very low, so we are not asking to get half the patients treated in order to grow the market that much, quite the contrary.

Small amount of total penetration, I think those area reasonable estimates for market growth. If we want to break down the patients that maybe amenable to this therapy, we have looked at a lot of different patient segments and these are the ones we think are important for Contrave, a typical obese patient today seeking therapy is predominantly a woman. On the right you see three quarters of the people seeking therapy in the past have been female. Most of them of child bearing potential, so it's important to have a good safety profile for those patients.

About 2/3rds of them are either depressed or have depressive symptoms as core morbid with their obesity. Half of them complain of uncontrollable food cravings or kind of eating disorder issues or causes for their obesity and that’s identified by both physicians or patients in market research and about 2/3rds of them again have some core morbidity like diabetes or just lipedema with their obesity.

So let me breakdown each of these important segments which make up the vast majority of the market and diabetes, I think this is a great target for Contrave, Takeda it's a great partner to have with the diabetes franchise. They have called on these physicians for a long time that got relationships and if you have a Type 2 diabetic is obese weight loss is a natural thing to recommend and if you have a tool to do it it's a good fit. You can see the hemoglobin A1c improvements in our diabetes trial and they are significant that’s a placebo subjective reduction of about a 0.5%. Lipedema HDL and Trigs you get good reductions they are going in the right direction driven by the weight loss from our Phase III trials and exploratory end point of eating control or individual analog scale showing significant reductions and things like how able are you to resist true cravings when you’re on Contrave or eating in response to food cravings. This is important I think it's driven off the mechanism of the anti-addiction component of the combination from naltrexone and then here we did an open label study in the obese depressed where we enroll people who were moderate to severely depressed not on anti-depressants, open label put them on Contrave and then measure depression scores throughout the study in a measured way and you can see that the depression resolved as you would expect with the full strength dose of bupropion dose and weight loss went down to about 10% at the end of six months in open label study.

Well again another great target and a preferred target by physicians given the profile of the drug. This is some older IMS data from 2009 that shows the blue bars, the majority of the market is women that got are Xs in the past and then you can see the age skewed to the younger women. So a lot of these are women of child bearing age. And again that’s an important from a safety standpoint from a (inaudible) or birth defect risk.

Emphatic follow-up product that we have it's completed Phase 2b with the FDAs ruling qasimia and approval of a drug that has an anticonvulsant which is what Emphatic is a combination of the Zonisamide plus the same dose of bupropion as Contrave. It works very well on the efficacy standpoint but it does have the side effect profile, the handicaps that we believe from the anticonvulsant. We plan to take this drug forward here are Phase 2b data on weight loss, you can see two of the doses that we tested there showing nice weight loss at the end of 24 weeks and here is an extension trial where we show you know the weight loss continued down quite a bit in the long term follow-up versus placebo.

The plan for the product are to put it into a rest of the world partnering process and not do Phase III trials on our own or fund those but to fund that and share those trials with a partner. For the North American agreement again Takeda a great partner for us. Takeda has experienced launched launching primary care drugs and then maintaining them and growing them in the market, they build brands, Actos was a great success for them. They resubmitted for Alogliptin. We look to see the outcome of that regulatory process and the anticipated launch for Alogliptin. The ideal deal of 50 million and upfront milestones on approval or eligible to receive with that 100 million in milestones between approval and launch and aggregate of about a 1 billion in milestones, sales royalties tear from 20% on the first sale all the way up to 35% and Takeda is responsible for all the cost of the launch buys product from us at cost.

To our cost of fund success in the market are essentially zero, Takeda has got the resources and they have contractual obligations to specific levels of primary detail equivalent dollar spend, sales force incentive compensation it's all spelled out and contractually obligated. So we feel really confident that Takeda is going to put a blockbuster primary care drug launch effort behind Contrave when it gets to market and we think that’s what it's going to take in order to really put these drugs into orbit once they hit the market. In summary, we think there is an attractive value proposition for Orexigen, significant potential revenue, a P&L that doesn’t have a lot of expense on it on a go forward basis. The Light Study is up and running probably enrolled the majority of those costs are going to come into this calendar year. We got the rest of world rights, we got our second product that we can fit into in an interesting deal structure there. Takeda is capable and the team at Orexigen is committed, got a lot of experience and so far we have been executing incredibly in the Light Study and we look forward a lot of nice value creating events next year. Thank you.

For those interested I guess I will remind you there is a breakout.

Question-and-Answer Session

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