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The newly FDA approved anti-obesity drugs by Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) (Belviq) and Vivus (NASDAQ:VVUS) (Qsymia) have generated a substantial amount of media attention due to the huge market potential of these drugs. Nonetheless, several articles have pointed out that any new anti-obesity drugs face marked challenges in penetrating this multi-billion dollar market because of the problematic history of these types of drugs in general. Indeed, third quarter sales data for Vivus' Qsymia was embarrassingly low at $41,000, which was based on a sum total of 5,560 prescriptions sold between the drug's launch on September 17th and October 26th. This is well below the multi-million dollar launch projected by numerous analysts, and illustrates the problems these drugs face in garnering market share.

As I've stated before in another Seeking Alpha article, my conversations with medical experts in this field indicate a strong reluctance by doctors to prescribe anti-obesity drugs, in large part, because of their tenuous history. Given the need for a substantial educational and marketing effort on behalf of these types of drugs, I believe that Contrave, another anti-obesity drug currently undergoing clinical trials, stands to benefit from potentially being the third drug to reach the market. Namely, I believe that Arena Pharmaceuticals and Vivus will bear the brunt of this educational effort in terms of expenses and time, opening the door for Contrave to walk into a radically different marketing environment. Even so, comparatively few articles have featured Orexigen Therapeutics (OREX), Contrave's developer, as a possible investment vehicle in the anti-obesity space. This is the goal of this article.

Contrave and its mechanism of action

Contrave is a fixed dose combination of two drugs that are already approved by the FDA: naltrexone sustained-release (SR) and bupropion. The drug's proposed therapeutic benefit is to decrease appetite by regulating energy balance.

Bupropion acts by stimulating centrally-projecting neurons that contain peptide products of pro-opiomelanocortin (POMC). POMC neurons have direct connections to the hypothalamus, which plays a major role in the regulation of appetite. By contrast, naltrexone prevents inhibition of POMC neurons by blocking the action of β-endorphin. POMC neurons release alpha-melanocortin stimulating hormone (α-MSH), which binds to the melanocortin 4 (MC4) receptor, which in turn initiates a cascade of actions resulting in reduced energy intake and increased energy expenditure. The ability of naltrexone to block this inhibitory feedback loop is believed to facilitate a more potent and longer-lasting activation of POMC neurons, thus amplifying the putative effects on energy balance. Overall, the co-administration of bupropion and naltrexone is believed to produce a significantly greater effect on the POMC firing rate than either compound administered alone, suggesting that the drugs act synergistically.

Phase III Efficacy Results and Weight Loss Benefits

Three independent clinical trials examining Contrave's efficacy showed statistically and clinically significant weight loss at 56 weeks. Patients in the trials lost between 11 to 22 lbs, with approximately half of the patients in the trials losing more than 5% of the body weight compared to placebo. Comparatively, Contrave has a similar efficacy compared to Belviq, but was found to be efficacious in a much larger patient population. Both drugs have a generally lower efficacy compared to Qsymia, however.

Safety Profile of Contrave

According to the pooled patient data (N = 1515 placebo patients; N = 3239 Contrave patients) from Phase II and III trials, the observed safety and tolerability profile of Contrave was similar to the well-established safety profiles associated with naltrexone and bupropion. Even so, patients did experience a significantly high incidence of nausea and vomiting on the combination of naltrexone and bupropion relative to the individual components. Specifically, 31.8% of patients experienced nausea and vomiting on Contrave, although most of these adverse events dissipated with time. Most importantly, major cardiovascular adverse events (OTCPK:MACE) were uncommon in the clinical trials, and occurred at rates similar to placebo (0.07%; 1 stroke) and (0.12%; 3 myocardial infarctions, including one death). To date, the FDA has not accepted this conclusion on MACE events, significantly slowing down the approval process for Contrave (more on this below).

Contrave's History with the FDA

March 2010: Orexigen Therapeutics, Inc. submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for Contrave (naltrexone SR/bupropion SR), its investigational drug for the treatment of obesity.

June 2010: U.S. Food and Drug Administration (FDA) accepted for filing the Company's New Drug Application (NDA) for Contrave, its investigational drug for the treatment of obesity. In the same month U.S. Food and Drug Administration (FDA) tentatively scheduled a Division of Metabolic and Endocrine Drug Products Advisory Committee meeting on December 7, 2010 to review the Company's New Drug Application (NDA) for Contrave.

December 2010: U.S. Food and Drug Administration's (FDA) Endocrinologic and Metabolic Drugs Advisory Committee voted 13 to 7 that the available data adequately demonstrate that the potential benefits of Contrave outweigh the potential risks when used long-term in a population of overweight and obese individuals and support approval. The Committee voted 11 to 8 that a dedicated study to examine the drug's effect on risk for major adverse cardiac events should be conducted as a post-approval requirement versus pre-approval. The advisory committee's decision was a non-binding recommendation to be considered by the FDA in finalizing the review of the Contrave New Drug Application (NDA). A PDUFA action date of January 31, 2011, had been assigned for the review of the NDA.

January 2011: The FDA issued a complete response letter dated January 31, 2011, regarding the New Drug Application for Contrave. The FDA noted concern about the cardiovascular safety profile of naltrexone/bupropion when used long-term in a population of overweight and obese subjects. Specifically, the letter stated that "before your application can be approved, you must conduct a randomized, double-blind, placebo-controlled trial of sufficient size and duration to demonstrate that the risk of major adverse cardiovascular events in overweight and obese subjects treated with naltrexone/bupropion does not adversely affect the drug's benefit-risk profile."

February 2011: FDA notified the company that it would need to conduct an extremely large-scale study of the long-term cardiovascular effects of its drug, Contrave, before approval could be considered.

June 2011: Orexigen Therapeutics, Inc. announced it met with the FDA regarding the New Drug Application for Contrave extended-release tablets for the treatment of obesity, including weight loss and maintenance of weight loss. Orexigen sought the meeting to gain clarity on the approval deficiency stated in the Complete Response letter the Company received on January 31, 2011. The Complete Response letter requested that the Company conduct a randomized, double-blind, placebo-controlled trial of sufficient size and duration to demonstrate that the risk of major adverse cardiovascular events in overweight and obese subjects treated with Contrave does not adversely affect the drug's benefit-risk profile. After that, The Obesity Care Continuum (OCC), represented by The Obesity Society (TOS), the Obesity Action Coalition (OAC), the American Society for Metabolic and Bariatric Surgery (ASMBS) and the American Dietetic Association (ADA), expressed a deep concern for the recent decision by the FDA, Division of Metabolic and Endocrinologic Products (DMEP), to require Orexigen to conduct a pre-approval cardiovascular outcomes trial for Contrave, even after the FDA Advisory Panel voted for approval of Contrave with a post-approval cardiovascular trial. Furthermore, the OCC believed that the requested pre-approval outcomes trial was unprecedented for any disease and would generate more information than was necessary or feasible.

September 2011: Orexigen Therapeutics, Inc. met with senior officials in FDA's Office of New Drugs (OND), the Company received written correspondence detailing OND's design requirements for a cardiovascular outcomes trial (CVOT) for Contrave that would address the Complete Response Letter ((NYSE:CRL)) received in January 2011. Orexigen believed that these design requirements are reasonable and feasible and provide the certainty required to reinitiate development of Contrave. Importantly, FDA stated that "if the interim analysis meets the specified criteria to exclude an unacceptable increased cardiovascular ((NYSE:CV)) risk, the drug could be approved." Furthermore, the FDA stated that "While we still plan to convene a public advisory committee meeting to discuss topics related to obesity drug development early next year, that meeting will not impact on the advice provided in this letter and the agency will honor the advice provided."

2012: Orexigen Therapeutics reached an agreement with the FDA on a Special Protocol Assessment for the Contrave outcomes trial. The agency declined to approve Contrave in 2011 due to the drug's cardiovascular effects when used long-term in a population of overweight and obese subjects. Orexigen previously requested that the FDA consider Contrave's approval based on existing data and a post-marketing study to meet the interim cardiovascular outcomes requirement from the ongoing Light Study shortly, but this request was denied by the Center for Drug Evaluation and Research (CDER).

Contrave's approval thus hangs on its safety analyses from the ongoing Light Study, which tracks MACE in a large number of patients taking Contrave compared to placebo. Specifically, the Light Study is expected to enroll 9,000 patients by the end of 2012, and the company hopes the FDA will accept an interim data analysis of MACE to support a New Drug Application (NDA). The company has stated in conference calls that the interim analysis might be available as early as the second quarter of 2013. An average review time of 10 months for NDA's would thus put Contrave on track for approval in the 4th Quarter of 2013. Based on the company's statements in recent conference calls, it appears that the FDA is willing to seriously consider using the interim results from the Light Study, giving Contrave a much higher chance of approval in 2013.

Conclusion

Contract would be the third anti-obesity drug approved in two years by the FDA, and would have the marked advantage of benefiting from its competitors' ongoing educational efforts. While Vivus is struggling to overcome the marketing restrictions placed on it by the FDA, Belviq's launch is unhindered by such cumbersome requirements. At this point, I no longer believe Qsymia will be a major player in the anti-obesity space because of these restrictions, and its recent rejection in Europe. As such, the race for the top spot should come down to Belviq and Contrave. Before taking a plunge into OREX, however, I would closely follow the sales numbers of Belviq in North America following its pending launch. The numbers will be telling of the medical community's acceptance or rejection of anti-obesity drugs in general.

Nonetheless, OREX is certainly worth watching because Contrave has a marked competitive advantage over Belviq, in that it works in a much larger patient population. Thus, if Contrave is approved by the FDA without a heavily restrictive REMS and a culture shift occurs within the medical community regarding their acceptance of anti-obesity drugs, I believe Contrave will end up being a blockbuster drug. At the end of the day, doctors will have to ask themselves a simple question, "Why prescribe Belviq over Contrave?" The efficacies are highly similar, but Contrave is more likely to work on a given patient. That will be the key to OREX and Contraves' success going forward.

Source: Orexigen: Is Contrave The Long-Term Winner In The Anti-Obesity Drug Wars?

Additional disclosure: This article was co-authored by a biotechnology intern (YK) at Enhydris Private Equity, Inc.