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Orexigen Therapeutics, Inc. (NASDAQ:OREX)

Analyst Day Conference Call

December 18, 2012, 09:00 am ET

Executives

McDavid Stilwell - VP, Corporate Communications & Business Development

Mike Narachi - President & CEO

Mark Booth - Chief Commercial Officer

Preston Klassen - SVP, Head, Global Development

Analysts

Corey Davis - Jefferies

Lee Kalowski - Credit Suisse

Cory Kasimov - JPMorgan

Jason Zhang - Edison Investment Research

McDavid Stilwell

Good morning. If everybody could please take their seats we will get started in just a moment. So welcome to Orexigen’s Analyst Day. I am McDavid Stilwell, Vice President of Corporate Communications and Business Development at Orexigen. And we are very happy to be here today.

We will be making forward-looking statements and please refer to our SEC filings for a more wholesome discussion of the risks and uncertainties that affect our business. We will not have any obligation to update the information that we provide today or in the future.

So today we are going to discuss the Light Study next steps and provide a discussion of the scientific underpinnings of Contrave and then Mark Booth our Chief Commercial Officer will discuss our recent market research and we look forward to providing those details to you.

So without further ado here's Mike Narachi, our CEO.

Mike Narachi

So the laptop, McDavid just tell me how do I advance these slides, is it this little button? Oh, I thought that was Preston’s laptop. Thanks for coming today and for your attention and your support throughout this entire year and many of you years prior.

First, let me talk a little bit about the team at Orexigen. As you can see in this photograph the totality of the team is quite small and we have a couple of people in our staff couldn't make the photo-shoot based on things that they were working on for Orexigen. With a total of 38 employees and it’s a really seasoned and experienced team. I know you hear that a lot but the only way that we can stay this small and do all the things that we are doing including running this 10,000 patients outcomes trials by having the experience that this team brings to bear to the lot of the challenges and opportunities that we have.

Its not just the executive team that's listed here, but also virtually all of the employees and it’s a really high performance team; we set a really high standard for ourselves and I hope the results that we've delivered over the last couple of years exemplify that starting first I think with the AdCom that we held in 2010 where Preston kind of MC-ed that event. That was a first successful obesity AdCom in 13 years and I think that was kind of an ice breaker for change in the space. We then navigated some really ambiguous and choppy waters with the regulatory authorities throughout 2011 and then we initiated the Light Study and the performance today that was announced I think is phenomenal to probably one of the fastest growing large clinical trials that we know of.

So those are the kind of performance standards that we've been holding ourselves to and the experience of the team makes us, you know, the kind of standard that we can live up to. I won't talk about everyone on the team today, but I will talk a little bit about Preston and Mark as I introduce them for their sections. Also with us today are Carol Baum and Kristin Taylor in the back of the room; Heather Turner our General Counsel is here and Jay Hagan cannot be here today. He recently had an elective surgery on his back to do a little dysectomy and so he is probably listening and recovering. Hey Jay, we need you back. See you at JPMorgan.

We also have a solid Board of Directors and the Board has been evolving since I joined the company about 3.5 years ago, anchored by our Chairman, Eckard Weber, who is actually on the founding intellectual property for the company, the Weber/ Cowley patent for Contrave.

Peter Honig recently joined the Board a couple of years ago. He was former, I guess he started at FDA. He was one of the guys instrumental in creating the Office of Safety at FDA and he was the Director of the group. He then went to Merck where he became the Global Head of Regulatory Safety and Quality and now he has had Global Regulatory Affairs at AstraZeneca and he has been really instrumental in all of our health authority interactions and helping us with the strategy there.

Wendy Dixon, former Chief Marketing Officer and President of Global Marketing for Bristol; Pat Mahaffy joined the Board shortly before I joined the company; Pat, as a successful CEO brings perspective into the board room far beyond and now recently with Clovis. Lota Zoth was an E&Y partner, and then came into Pepsi and then was a CFO at MedImmune and her financial experience and discipline helps us on the Audit Committee, etcetera.

And recently, David Endicott joined the board. This was announced just a couple of weeks ago. David as a President of Allergan Medical brings not only sort of that interesting background from medical aesthetics and sort of consumer branding campaign and global experience with responsibilities for rest of the world, Latin America and other important markets, but also with the obesity interventions that they have with Lap-Band and with gastric balloon and some other successes and challenges there. Those are really great perspectives to add into our strategy sessions.

You have probably seen a lot of these graphs before many, many times and I don’t want to belabor the global epidemic that the US is unfortunately leading for obesity. You can see from the US geographic map that the trends for the weight gain of the nation are alarming. The picture globally looks very similar in most of the developed countries around the world.

You can see on the bottom right graph and I am trying to set up here not only that we have a problem but the change is happening and it’s inevitable to pass the change. On the bottom right graph you can see the elevating blue line that shows where our percent of GDP is spent and the line that’s growing is healthcare and that line is driven by chronic disease which I believe the root cause of most of that increase in spending is obesity, lifestyle, diet, etcetera. The rest of the cost problems are not as large because they are not growing as a percent of GDP, the unsustainable part of that picture in the United States is the growth of healthcare. So we know we have to change that that’s completely unsustainable.

I think part of the solution of that is getting our head around chronic disease and it’s become a topic everywhere; we are not getting much for our expense that graph on the bottom left, the far right dot shows life expectancy relative to expense and the far right dot is the US; we are spending by far more per capita on healthcare, but we are not the highest by a long stretch in terms of life expectancy for those expenses. Some of this may be indicative of the subsidy that the US consumers paying for healthcare globally because we are one of the last pre-markets for healthcare economies, but I think it’s also just indicative of an inefficiency and really not tackling some of the problems that we need to tackle.

Last year at the Annual Pharma Meeting, chronic disease was the topic; recently at the United Nations they dedicated the whole meeting to chronic disease with obesity as a cause of that, and so it really capture the attention of elected officials and policy makers globally and I think we are poised now to capitalize on that change. And I think when a problem gets big enough and the awareness gets large enough and you know that it’s unsustainable that's when you finally make tough choices and start to do something about it, and I think pharmacotherapy is going to be part of that solution.

The only proxy I can think of where we tackle the problem like this before was smoking, so smoking a controllable risk factor, the world and the nation got behind it, largely through education and taxation solutions, pharmacotherapy played a smaller role there with, nicotine patches, Zyban and Chantix; but I think obesity is a tougher problem to challenge and recently The Economist published a special report, I think three days ago, which is a great report if you haven't seen it yet I recommend that you take a look at it, it’s a nice summary, the global economic problem and some recommended solutions many of which are already in place.

And I talked about totality of solutions that are both economic, policy related and some therapeutics in fact the both Arena and Vivus and Orexigen I mentioned with new therapeutic interventions. I think in this case obesity therapeutic interventions are going to play bigger role in smoking cessation, I think its going to be more like the therapeutic interventions that I we have had to bring the bear for dyslipidemia hypertension diabetes and we are right on the cusp of that and poised for that change to occur.

A couple of things I just want to point out hopefully to give us confidence that this change is already occurring. First, no known fact, the Affordable Healthcare Act actually allows us now by law to increase the sort of characteristics, incentives or penalties for differential pricing of healthcare based on controllable risk factors. Today its 20%, the [EACA] lets it go to 30% and it gives the secretary the discretion to take it up to 50%. So you can have a person paying 50% more for their healthcare or less based on either biometrics or performance such as smoking, overweight etcetera. There's evidence of this already happening, 60% of the large companies in America already have wellness programs. I don't know if any of you have them. We do. One of the leaders of that was Safeway, where they have a wellness program that has these characteristic incentives for people to do the right thing.

At Safeway you basically get a discount if you are not obese and some of those are set up in the reverse. The State of Alabama Healthcare used to be free for State employees. Now at $25 a month if you are a smoker and $25 extra per month if you are not compliant with the wellness program managing your weight. So people are starting to put economic and educational and program incentives in place. Interesting the Department of Transportation recently issued guidelines, that if your waist and neck circumference are over a certain size, you must go get a sleep apnea test because of all the accidents that are occurring with people falling asleep while they are driving on public highways. This sent a shockwave through the 2.5 million truckers which operate most of the transportation on the roads and they lobbied and slowed the guideline process down, but for the first time I know of where we converted it from a healthcare due to a safety issue and that catalyzed immediate change.

To go and get a sleep test I think 80% of the truckers are obese or overweight. A huge percentage of them are diabetic. Average life expectancy of a trucker in the United States is 60. It’s a real problem amongst that industry based on lifestyle. The military has done something about it, and one of the fastest growing costs in the US military spending is the related healthcare expenses. And military has said in the army so far that if you are identified as someone who is overweight then you've got to get into a program and then you have metrics and until you get off the program you are on notice and you can't get promotions, you can't get transfers etcetera. And if you don't hit your metrics to get down to the target weight, then you could be suspended and if you then hit target weight and then get re-identified as someone who is overweight its over. One strike.

So these are the kind of programs and policies that are becoming socially acceptable because of that inevitability, because of that incredibly high cost that we are driving in here and on the bottom you can see the quote from the Chief Medical Officer at United Health. It says, this is obvious, there's no way we can afford these controllable risk factors without doing something about it. So in the spirit of identifying a problem and saying change is going to happen. I want to introduce a guy who doesn't want to talk about that, he wants to talk about getting something done. Preston Klassen came to Orexigen from First Academia and then industry experience where he actually has experience with several outcomes trials. When we hired Preston we didn't think we are going to need the experience from the outcomes trials, unfortunately we had to do that, but he has been really successful in leading that charge. But he also has an interesting background. He was the clinical development leader for Amgen first small molecule, Sensipar which went on to successful commercialization and the skill that he brought to bear there was he could look forward two or three years into the launch, integrate it backward and make sure the drug and the product and the company have the information necessary to successfully commercialize the product and that’s a rare skill.

We watched Preston navigate a choppy, dicey advisory panel meeting with the FDA on EPO, on the ESAs. The panel that he led was around renal failure indications and it was successful on that it led at the time with no label changes. Then he led our own AdCom which as I said earlier was our first successful advisory panel in 13 years for obesity therapeutics. And then, since then, he has presided over a team that delivered results on the life study which are just outstanding, and we announced today the closure of the screening of the Life Study. We screened 13,192 patients in 6.5 months. Close to 11,000 of those will be enrolled in the trial and then ultimately, they will progress to about 9,000 randomized patients, and Preston will talk more about that. But just a phenomenal result; I think it's the fastest enrolling large clinical trial that any of us know about and just a tremendous result. Preston?

Preston Klassen

Thanks Mike. Nice to see everybody this morning. See if I can get everything started here. Okay, so Mike’s already talked about the rise in that healthcare cost increases driven predominantly by chronic diseases. Diseases like Type 2 diabetes and we know that diabetes patients have an annual healthcare cost that’s easily over twice that of a non-diabetic patient population. Actually if you look at the life time actuarial estimates somewhere around 10 to 13 times the cost for a diabetes patient population compared to non diabetic patient population. And obesity is clearly not only the upstream driver of the epidemic of diabetes itself; obesity is a driver of the clinical consequences that are attendant with diseases like diabetes. So on the left you see that the risk of diabetes increases exponentially above the BMI of 27 from men and even more particularly for women, and on the right the risk of death for a diabetic patient is clearly higher than that of a non diabetic reference group, but it’s far higher if one is also obese and diabetic.

Now this isn’t just true for mortality risks, it’s true for the kinds of healthcare diagnoses and procedures that drive a lot of the costs. So limb amputation a huge problem among the diabetic patient population, much higher if you are obese and diabetic. Heart attacks, coronary bypass grafting, general hospitalizations. So obesity is driving this epidemic, but it’s also very clearly in the driver seat in terms of the healthcare expenditures that are associated with this. But here is a point that’s often missed, you don’t have to eradicate or cure obesity in order to have a dramatic improvement, and here we see that multiple studies have demonstrated that even modest degrees of weight loss, we are talking 5% even less than less than 5% can significantly lower the risk of developing a chronic disease like diabetes.

There are two trials here, on the left the diabetes prevention program or DPP and on the right the XENDOS trial. So DPP was a lifestyle intervention. There are three arms, here I am graphing two of the arms; the lifestyle intervention arm aimed at weight loss and then the metformin group as the control and on the right XENDOS it was orlistat and Xenical compared to placebo both arms on top of a lifestyle modification so here is the interesting thing about both studies, the same degree of weight loss if you look at the relative differences between these two groups. Life Style compared to metformin is about 4% difference in weight loss, from baseline at one year, and its less than that in the ensuing years two, three and fours, a four year trial. So in the order of just over 2% difference between the two [grids].

Same thing with the XENDOS trial. Orlistat produced on average about 4% weight loss compared to placebo of one year, it was down to 2.4% out at year four. Both studies, same degree of weight loss, fairly small like most people say that's fairly modest it’s less than the 5% threshold that the [EACA] considers, to be the base line for clinically meaningful, and yet both studies demonstrated over that time period of 40% relative reduction in the risk of a new diagnosis of type 2 diabetes in this obese patient population at risk of developing type 2 diabetes, 40% reduction that is significant. And yet even in the phase of this clear evidence that there is benefit for even modest degrees of weight loss, we know that it’s often very difficult to achieve and sustain modest weight loss with diet and exercise alone and why is that, why is it so difficult. Well in part it’s difficult because from an evolutionary perspective our brains and our metabolism are essentially wired to conserve energy and body weight.

And this wiring worked well for us years ago 10,000 of years ago or 100,000 years ago when we were scavenging on the planes and scavenging on the forest. Our brains have evolved certain aspects of how to seek out the right types of food and right types of energy, let's just take one example shown here. Our predilection for sweet foods; so the predilection developed in part because its time sweet taste represented fruit, fruit was safe to eat and if you can get it, it’s a quick access to energy. So our brain is involved for desire for sweet taste. But today of course sweetness is much more than about fruit. In fact, sweet food is today definitely predominantly represents highly refined low quality nutrition.

And so the drive for sweetness persists in a sense the wiring of our brains have not evolved to match our current environmental paradigm. Now there are two areas of the brain that are key for driving appetite and energy expenditure and I'll talk about both of them and the arcuate nucleus of the hypothalamus, it is a center for energy homeostasis and weight control and then the reward pathway circuitry that is dopamine mediated.

I'll talk specifically about the mesolimbic axis of that but both dopamine and opioid receptors drive behavior in response to powerful and repetitive stimuli. And it was Mike Narachi and actually Eckard Weber as co-founders that discovered new insights into the CNS pathways.

So the idea and the data behind Contrave arose from the very novel discovery more than simply putting two drugs together that have weight loss properties. Let's start with the arcuate nucleus of the hypothalamus. So this area of the brain is positioned right at the edge of blood brain barrier.

It has access to both the circulation as well as the cerebrospinal fluid and so its able to sample metabolic activity insulin, glucose, leptin, a variety of signals that takes in those signals and then sends out signals predominantly through the MC4 receptor that drive appetite and drive energy expenditure and there are two neurons that play a key role here in a counterbalancing mechanisms.

POMC or pro-opiomelanocortin when you activate the POMC neuron, you have a reduction in energy from the system. Appetite goes down, food intake goes down and you have an increase in energy expenditure.

The other side of the coin is NPY, Neuropeptide Y or also known as agouti-related protein. When this system is active you have an increase in appetite and increase in food intake and a reduction in energy expenditure. So everything is geared towards conserving energy within the body.

And again, the evolutionary wiring is clear here in terms of which one’s in the driver seat because NPY exerts tonic suppression over POMC. So the body the brain is geared towards trying to conserve energy and conserve weight.

Now it was Cowley’s group at Oregon Health Sciences at the times that made a key discovery in terms of the regulation of POMC and spark the idea for how to increase activation of the POMC pathway that would ultimately drive reductions in appetite and increases in energy expenditure through MC4. And this comes from their 2001 report in Nature.

The graph at the top right or at the picture at the top right demonstrates POMC firing action frequency, action potential frequency from an isolated POMC neuron and the firing of the POMC neuron can be completely shutdown when the membrane is hyper polarized when you add an opioid agonist. So you add an opioid to POMC neuron and you shutdown firing of that pathway.

At the bottom right shows that that membrane hyper polarization itself can be blocked simply by adding an opioid receptor antagonist so block that receptor and you can keep the POMC pathway firing and these sets up a very nice mechanism of action story.

POMC stimulation releases its neuro transmitter alpha-MSH which leads to downstream activity through the MC4 receptor again as I mentioned reduction appetite, increase in energy expenditure leading to clinical weight loss. A cleavage byproduct as alpha-MSH has produced is a beta endorphin and so as POMC is active there's a beta endorphin that kicks off an immediately swings back around hit the POMC neuron and it’s an opioid agonist and it tells POMC to shutdown, stop firing.

The body is geared to not want to go down this path. And that leads to the very testable hypothesis that if you can activate pharmacy with for example, a drug like Bupropion and then simultaneously remove the auto inhibition by blocking the opioid receptor with a drug like Naltrexone.

You can increase the overall pharmacy activity and hopefully the downstream clinical effects and Bupropion and Naltrexone were chosen by Orexigen in order to leverage a good degree of existing comfort level with these drugs. Bupropion and Naltrexone, both approved in the mid-1980s have a safety and tolerability profile that’s well characterize.

Bupropion, of course, very commonly prescribed drug 7 million people take Bupropion today and it's branded in variety of generic forms with indications in major depression, other mood disorders like seasonal affective disorder and smoking sensation. Over the last 25 years, over 50 million patients have sampled Bupropion.

In terms of Naltrexone blocking the opioid receptor, indications and again behavioral control; alcohol and opioid dependence, utilized in over 1 million patients over the last 25 years; so very well characterized. And the preclinical testing that initially supported that hypothesis in the arcuate nucleus of hypothalamus is shown here.

So Cowley’s group, again isolated POMC neurons using hypothalamic slice preparations and invase those neurons either in Bupropion in top left, Naltrexone alone in the bottom left with the combination on the right hand side and you can see that while each individual agent had some effect on the firing of those POMC neurons, it was the combination of the two that was clearly synergistic. POMC pathway is clearly activated synergistically when the two drugs are combined.

Now before we talk about the clinical data that really supports hypothesis and that’s what's important, it’s not the nerve cells, it's what's happening clinically in terms of weight loss. We will talk about another area that bring briefly that’s involving eating behavior, the dopamine mediated reward pathway and I find this very interesting because of the overlap in terms of addictive disorders, eating behavior and the brain circuitry that’s involved.

So, there are number of areas in the brain that are driven by dopamine and that control behavioral responses to external stimuli. These areas are in the mid brain and they modulate the motivation and the sustainability of effort that are needed to accomplish certain behaviors.

In addition to dopamine playing a role in these brain pathways, the opioid receptor is found in most of them as well as is shown here in the bottom left for the mesolimbic circuitry between anterior of the brain ventral segmental area and the nucleus accumbens.

Now drugs of abuse like alcohol, cocaine etcetera impact these circuits and provide very powerful rewards stimuli both physical and psychological and its repetitive reward feedback triggers learned in addictive behavior and as it turns out increasingly, we are understanding that the evidence points to comparable dopamine allergic responses let better linked to food reward.

I should be clear that the response, the body’s response to food the brain’s response to food is much more complex than a simple drug addiction paradigm but as an example you can take a group of healthy volunteers and this is shown in the bottom right. You can restrict them for a while in terms of food and then PIP scan their brains and you look at something neutral on the bottom left, a family tree genealogy family tree or in the bottom right a big juicy cheese burger.

And you see the dopamine changes in the brain. This is a slice of the --- this cut is slice of the striatum. I am just going to talk louder and keep going. And we have also shown so this is basically your brain on when you are looking at food stimuli or food cues and you can see that you have a change in dopamine.

Now I could show you from the same paper, the same graph in someone who abuses cocaine looking at a neutral picture and then looking at picture someone taking cocaine. So it’s a same types of pathways that are involved.

Now pre-clinically, we've shown that the mesolimbic reward circuitry is involved as well. Looking at models that inject in mice, Bupropion, or Naltrexone alone into that ventral tegmental area that I mentioned and each does have some impact on reducing food intake but again it’s the combination of Bupropion and Naltrexone injections that has a synergistic impact in really reducing food intake.

So again, preclinical evidence that by hypothesis about these two drugs having a synergistic action in the reward circuitry plays out. Go back to the clinical and brain scans; we have conducted a randomized placebo controlled clinical trial. Looking at areas of the brain that had PIP scan activity greater in Contrave patients compared to placebo patients, and so what you see here the placebo subtracted figures.

The areas of the brain that light up map to areas that involved in behavioral control. So you have memory and conditioning, you have an internal awareness of taste and fullness, self control at the anterior cingulate and then somatosensory progressing.

We need area they are active, they are areas that tend to reduce --- I am going to give a pause here for a bit. Are we good to go? I will wait for a signal, okay, I got the thumps up, you can take…

Okay, when these areas are active what they do? They reduce the drive for compulsive or impulsive eating behavior. So we have strong evidence that this mechanism of story plays out in multiple areas of the brain and importantly in a way that is novel and not obvious. Again this is not a matter of taking two drugs together each of which has some degree of weight loss property and you put them together and then somehow additive. In fact the reason its novel is because naltrexone on its own does not have any weight loss property. But through the mechanisms that I have described naltrexone potentiate bupropion and the dopamine neurogic actions of bupropion to drive appropriate weight loss. So again a novel finding that helps elucidate some of the mechanisms around control of appetite and energy expenditure.

Now when you do test this hypothesis in the clinic, you see the same thing play out in terms of again that in fact it is more than additive so this comes from our key dose finding Phase 2 trial with six months duration in the far left the placebo group you see that naltrexone alone the next bar over has essentially no weight loss compared to placebo bupropion and has about 2% to 3% placebo subtracted weight loss, but its the combination of the two that delivers weight loss that is more than double that of bupropion alone even though naltrexone essentially does nothing by itself.

So again if this scientific hypothesis of a unique mechanism of action uncovering a new understanding of how these two factors, dopamine and new opioid receptor blockers can work together in a variety of areas of the brain that led to a robust composition of matter and method of used claims from an IP perspective of both in the US and globally.

Okay. Now Contrave’s Phase 3 efficacy results have been well documented, so I'm not going to go through them in detail, but I do want to point out that its clear from the market research that we've done that patients and physicians are certainly not really paying attention to placebo subtracted weight loss that's not the factor but they are thinking about choice of obesity therapeutics and Mark Booth is going to talk much more about the market research and what it tells us patients and physicians are looking for. But the short answer is what they are looking for is this therapeutic I am thinking about taking, this diet and exercise program or this medical pharmaco therapy that have a reasonable likelihood that I can have success.

So how much weight the people on Contrave who are taking Contrave lose on average? Well, in our standard clinical trials with standard diet and exercise regimen it’s about 8%, a little over and its almost 12% when you combine that with a really good, a really intensive weight management program. More importantly again in terms of chance of success, what's the likelihood that I'm going to lose a lot of weight. Let's say greater than 10%. That's shown on the right. It’s 35% to 40% with routine diet and exercise in our Phase 3 program; over 55% when combined with a directed intensive weight management program. Even more relevant than this cusp of the data is an early responder paradigm and we will talk about what that early responder paradigm means in terms of weight loss shortly. But the bottomline and Mark’s going to talk more about this, Contrave delivers market meaningful weight loss and we will cover some of the qualitative and quantitative market research data that backs this up.

Now with weight loss we see attendant improvement in a variety of other metabolic factors. So in our Type 2 diabetes trial the core diabetes study, we saw reductions in hemoglobin A1C on par with that of other anti-diabetic agents. So Januvia like efficacy, 0.5% placebo subtracted reductions in hemoglobin A1C. The patient who is taking Contrave, who completed the therapy, over half lost 5% or more of their body weight, over half also achieved the ADA hemoglobin A1C guideline of less than 7%. And post half analysis show that the patients on Contrave tended to take fewer rescue medications for the diabetes.

And for patients who have abnormal lipids or elevated triglycerides or reduced HDL, we see that Contrave significantly improved the lipid profile. So reductions in triglycerides shown here on par with other lipid agents like Tricor for example. An increase in HDL on par with drugs like (inaudible). So weight loss clearly has positive impacts on a variety of metabolic parameters and disease conditions and you see that with Contrave therapy.

So now we’ve also spent sometime covering the mechanism of Contrave that involves behavior control. This reward pathway and we have clinical data that also support that from the Phase III program. These are the data that backed that up in each of our Phase III clinical trials. We used a pre-specified control of eating questionnaire and we saw significant improvements in how patients reported their ability to actually control their cravings and improve their eating behavior. So questions like how difficult has it been to control your eating; how difficult has it been to resist any food craving; how often have you eaten in response to food craving? Statistically significant improvements across the board and this is important because cravings are the primary eating behavior that obese patients have issues with and these cravings are addiction like. They involve the same pathways and the constituents of Contrave directly address those pathways.

Now another insight; no program, no drug therapy is a fit-for-everyone. So this graph shows the distribution of response across one of our trials to Core 1 Phase III clinical trial and you see a similar pattern for any drug therapy. Frankly, for any diet program, for any exercise regimen; when people try a new weight management tool, many will have a response, but then some for a variety of reasons will not have a great response. Some even gain weight on the regimen, but how do you determine who is going to be a long-term success, because what you want, you want people on the right hand side of that graph, people who are having a good response and will enjoy and retain that weight management tool that they have begun.

But it's really not something you can tell ahead of time; we’ve interrogated our Phase III data; generally if the patients who actually have an early response they are going to go on to be on the right hand side of this graph and have a long-term response. So the idea is to identify those patients as early as possible and target them for chronic therapy and this early responded paradigm has already been accepted by the FDA; it’s incorporated into the labeling for the two approved our compounds for Vivus and Arena. And in our NDA and at our Advisory Committee Meeting in 2010 we advocated for an early responded definition in our case we have been advocating for 5% weight loss at 16 weeks; if you can meet that goal, you continue on chronic therapy; if you cannot meet that goal you consider switching to something else.

Now responders who evidenced early weight loss by week 16th go on to achieve very significant results that’s shown here. At the end of one year for these early responders, 85% had maintained at least their 5% weight loss; over half have lost greater than 10% of their body weight and about a third have lost over 15% of their body weight. And again, with the recently approved compounds there are a couple of early responder definitions across their labels, so you’ve got the 5% at 16 weeks or you have got 3% or 5% at 12 weeks you could splice and dice it many different ways.

But no matter what definition is applied Contrave has a meaningful proportion of responders, so for example 5% weight loss at 16 weeks across our Phase III program it was over 50%. Importantly, when you add an intensive weight management program which is to how we believe the drugs should be commercialized that goes up to almost 70%. And the amount of weight that these responders are losing at one year out is significant and it’s essentially identical to what you see with responders for the other two compounds. So for example, take Qsymia; according to their definition there are at least 70% responders, I think for Belviq it’s somewhere around 40% responders, but importantly for our responder for any of those compounds you are losing about 11% to 13% on average; so it’s the same across the board, responders we believe is fundamentally the way to go identify patients who are doing well early on target them for chronic therapy to increase on their satisfaction therapy, their compliance and their persistence.

Okay, now across a number for cardio metabolic parameters I talked about the ancillary benefits of weight loss in the Phase 3 program, we have focused on these early responders how do they do at one year in terms of improvements; I am not going to focus on the numbers of the right, you can have that for reference, but graphically on the left in addition to body weight at the top of course, we have significant improvements in weight circumference from base line, HDL and triglycerides in particular in terms of lipid at improvements, key reactive proteins, reductions of 25% to 40%, just going to have to talk a little bit louder. Improvements in quality of life, we use the IWQOL scale and I already touch hemoglobin A1C; we have also seen reductions in both systolic and diastolic blood pressure from baseline; again particularly among this early responders.

A word about safety; again we pick the appropriate naltrexone because the safety and tolerability profiles of these drugs are so well characterized over last 25 years. What we have seen in the Phase 3 program, 4500 patients in the Phase 3 program is a profile that is extremely consistent with what we know today about bupropion and naltrexone from their individual labels. Most common adverse event, related to tolerability, and I am tolerating this. Most of those AE miles to moderate in severity transient in nature and did not require patients to come off study drug. Serious adverse events were frequent in some of the placebo; now the human dynamics are very important and the seizure rate related to bupropion; identical to what you would expect bupropion and other doses we are using and no evidence of increasing depression or suicidality with very targeted investigation using the state-of-the-art scales for both.

Now in terms of the human dynamic profile and the theoretical cardiovascular risk that we have been asked to address by the FDA that's where the Light Study comes in and clearly I'm going to spend a few minutes talking about the Life Study and how we are getting to the interim analysis that will close out that cardiovascular theoretical safety question. So the Contrave profile addresses the market need. We've got significant weight loss with the drug particularly among early responders. The responder definition itself is simple and its appropriate for patients, its appropriate for physicians and I think as Mark will mention good for payers too. The ancillary benefits of weight loss are clear with Contrave; hemoglobin A1C lipids, inflammatory markers, and quality of life measures. But I think importantly it’s the secondary attributes of Contrave that differentiates the product profile.

I have talked extensively about control of eating, control of cravings. It’s a behavioral control drug with scientific hypothesis and mechanism of action is there and the clinical data back that up. Bupropion is an anti depressant and we know the overlap between the obese patient population with either frank depression or depressive symptoms and importantly neither drug in the combination is associated with (inaudible) risk. So that's the story behind Contrave, but clearly we've still got a path ahead of us and let's talk about that path.

From a regulatory perspective the path is clearly defined, and we are executing along it with speed and rigor. And Mike and them Mark will pick up from me in a moment to talk about the commercial path to success. We have a very clear view about what is going to take to create a block buster product in obesity with Contrave. Okay, so the regulatory direction. Again it’s very clear. Our NDA, our complete NDA has already been reviewed by the FDA, and it is clear that we've met the efficacy threshold and in terms of general safety and tolerability profile that has been established. We have robust dialogue, conversation about that at advisory committee and again the panel voted for approval.

Now the FDA deferred and had a single approval deficiency. They asked us to address one remaining hurdle and that is the question of theoretical cardiovascular risk on the basis of small changes in blood pressure and heart rate associated with Bupropion. Now it took us a while to get clarity on what that actually meant. We spent much of 2011 engaged in the formal dispute resolution process with the agency, but we finally did gain precisely the degree of clarity that we needed to satisfactorily embark on the study to address the complete response. Now more recently as we continued this dialogue with the HSD through the FDRR process, and we are in discussion on procedural details that maybe related to a faster path to resubmission than would normally be the case and I will touch on that at the end of my presentation.

A couple of comments about the key elements of the cardiovascular trial that we are running; the primary end point clearly is cardiovascular events, so it’s a [main] definition of cardiovascular death not the [LMI] or not (inaudible) stroke. Importantly the primary analysis as agreed to by the FDA is an ITT or intend to treat patient population. What we have to show at the interim analysis and we can power that off of about 87 mace events is we have to rule out or exclude a doubling of risks compared to placebo. So that means that when we run the interim analysis, the upper bound of that 95% confidence enroll has to be a hazard ratio of less than 2.0.

Now when we get approved the study will continue in a post approval setting for a number of years to the final analysis which is powered off of about 371 primary end point events and at that time the risk exclusion narrows to a 40% increase in risk, not a doubling. So the upper bound of that 95% confidence interval in a post approval setting would need to be less than 1.4. Very importantly we are allowed to do a real world test of Contrave for a long term exposure to study drug is only allowed in those who are actually experiencing benefit from therapy. So patients who have limited weight loss will evidence increases in blood pressure, discontinued study drug as we think that they remain in the study, events continue to be collected and those events contribute to the respective ITT group that the subject is randomize to.

And finally the patient population is targeting background, MACE rate of to 1% to 1.5% per year. That’s what the FDA requested of us. We're clearly targeting the upper end of that, because the event rate in terms of that range, the quicker we can get to the interim analysis and I will touch on that in a moment. So what's the probability of technical success? Well, it's high. The hurdle for approval is not based on demonstrating cardiovascular benefit, but again as I just mentioned, simply requires excluding a doubling of cardiovascular risk with essentially Bupropion because this entire question is related to Bupropion. So what do we know about Bupropion? Well, as I mentioned, well characterize over the last 25 years, over 50 million patients have taken the drug. Importantly large patient registries and the FDA’s own adverse event reporting system data set have been interrogated specifically to look for cardiovascular risk signals and they have not been seen in this large dataset analysis.

We performed and others have performed risk engine modeling of our one-year Contrave Phase 3 data suggesting a reduction overall in 10-year cardiovascular risk compared to placebo, particularly among responders. I will show that in a moment. And finally the trial focus, the entire design itself is on responders to drug therapy. Again, as I mentioned, allowing just real world test for a long-term exposure is only in those who are experiencing the benefits of the drug.

To just comment about the responder paradigm; this is how we would work it in commercial setting, but we’ve also incorporated this to some degree in to the Life Study design. So screening is simply taken a patient with appropriate BMI. They need of course to be motivated to hear the lifestyle change and at week 16, you simply ask the question, are you losing an appropriate amount of weight and you are not having increases in blood pressure. So if you can pass through that, you continue on it's chronic therapy if you cannot pass through that, you consider other therapies.

I mentioned risk engine. When you take all the phase 3 data and combine it in to a variety of models, it can be the framing and risk score, the assign risk, queue risk too which are all shown here. You see that the Contrave group of raw does very well compared to placebo, greater reduction in predicted 10 year cardiovasculars, but it’s really the Contrave responders who stand out, and these are the patients on the far right that we will be targeting for chronic therapy, these are the patients that we target in the life study that we are conducting today. I think it’s also instructive to mention SCOUT, that’s sibutramine cardiovascular outcome trial that really has driven FDA’s thinking lately about cardiovascular risk and obesity and very specifically for us Orexigen’s need to conduct a cardiovascular clinical trial.

So importantly we take away two key insights from SCOUT, both in terms of the probability of success as well as a critical design [wins] for the life study. I think the first thing to note is that the interim analysis hurdle that Contrave has been asked to pass through again excluding a doubling of risk on the basis of 87 or so MACE events. These are reasonable ones and that’s essentially what is required today for diabetes drugs. If you think about the SCOUT trial itself that’s shown here at an analogous time point in terms of whether we would be pulling the interim analysis, you don’t see a difference between the two curves even for drugs like sibutramine that has a greater sympathomimetic activity than bupropion. So essentially sibutramine in the SCOUT trial would have passed through what is our approval hurdle.

But more importantly in terms of SCOUT analysis and this is a post half analysis that was presented by Abbott at the advisory committee held in 2010. Analysis corroborate our focus on responders. They looked at patients who had evidence of early weight loss and no increases in blood pressure. They called them conformers but essentially that’s what we are using in terms of responders, and when you look at that patient population that subgroup analysis and that’s shown in the bottom two rows in blue, you see no difference in cardiovascular risk at the final analysis. So again corroborating what we are doing proactively in terms of the design of the life study.

Now I am going to wrap up with an overview of the Life Study itself and what the execution of the trail means in terms of our potential approval scenarios. We are very pleased with the overall academic oversight of the trail. We have mentioned in the past the Dr. Steve Nissen from the Cleveland clinic chairs the executive steering committee and Dr. Tom Fleming, chairs the data monitoring committee, I think it’s safe to say that it will be difficult to find two individuals with greater experienced both in safety evaluation in cardiovascular outcomes trials, the conduct of these types of studies and the oversight from a data monitoring perspective, so we are very pleased and grateful that they have learn themselves this trial.

A few points about the trial design itself, first in terms of screening here we are looking for, we have been looking for clearly overweight or obese individuals who are at higher cardiovascular risk. Again we are targeting 1.5% annual MACE rates, that's much higher than the general obese patient population. We get there by requiring the patients to either have type 2 diabetes with a variety of other risk factors or have pre-existing cardiovascular disease. And so we target these individuals, bring into a lead in a period, and then expect about 9000 patients overall to be randomized in the treatment period. They are coming at the study, they randomized one or two groups, it’s a very simple design, either active Contrave or placebo. But both groups receive an active weight management program, briefly I mentioned that in a bit, and in week 16 is this evaluation. Only those patients who have been [relatively] some degree of weight loss, its 2% and had no significant increases in blood pressure continue on study drug, the rest continue to be followed and they contribute events even though they are not taking study drug.

Now all of this again, is very important because it allows a real world test where the drug is been used in the way you would actually use it in the commercial study, I think it’s a big criticism of the sibutramine SCOUT trial. And again our chair of [ESC] Dr. (inaudible) has gone on record and is calling it highly innovative. This is not normal for these types of randomized clinical trials having the type of post randomized intervention like a week 16 evaluation where you then make a decision to take patients off drug or not.

But that's the way the drug’s used in the real world and so that's the way we agreed with the FDA to test it. We think it’s an important new component for these types of trials and we expect it to be adopted by other studies in the future.

Now our perspective is that pharmacotherapy for obesity is certainly about more than just taking a pill. It should be about an underlying weight management program in combination with medical therapy and we've already learned with Contrave in our Phase 3 program that our most successful results is when its paired with a comprehensive weight management program that comes from our COR-BMOD trial.

So for the Light Study, we have incorporated an innovative internet based approach. We call it WeightMate. It’s in partnership with Sharecare; it involves education with individualized coaching for individuals in the study. Our weight, food and activity tracking personalized goals, etcetera, empty dynamic communications each week and a contemporary design is kind of a Facebook like wall for communication.

And we think the commercial appeal for this type of program is clear, enhanced weight loss, drives patient satisfaction and we believe that drives compliance and then persistence. Okay. That's the design, let's talk a bit about execution as Mike already mentioned, we issued a release today announcing that we closed screening. I'm extremely proud of not only the Orexigen team but all of the key vendors that we utilized to help us conduct the trial as we've taken a rather innovative approach to the design.

I think we've taken an innovative approach to its execution and I think there's also just been outstanding. It is one of the fastest growing clinical trials in recent history. So we screened over 13,000 individuals. We shut it down as of yesterday. We anticipate that by the beginning of January that will result in about 10,400 enrolled and of those approximately 9,000 will pass through by the middle of January to the final numbers for randomization.

Now, the event rate is driven by the patient characteristics that we enroll. So we've been targeting as I said an event rate of about 1.5% that's the upper end of where the FA asked us to be and you can see in the middle column these are the targets that we've been looking to hit and as we look on a weekly basis for the patients who are enrolling in the trial and this evidence is the latest day to cut with about 8,000 individuals we are on track in terms of these parameters.

So age, the proportion that are actually in the younger age group, the gender split, ethnic minorities, cardiovascular disease, diabetes and smoking status, these are the key variables that drive event rates and what we are seeing today we do believe we will support that 1.5% annual events rate that we are targeting.

But obviously collecting events, it’s an event driven trial. We don't get to pull the trigger on the interim analysis until we have approximately 87 MACE endpoints. So how do we get there? Well, it’s always a function of execution, the number of patients that you enroll and how quickly you enroll them. We are doing well there. It’s a function of the underlying patient population, who they are, what their native or underlying MACE event rate actually is. We know that from a modeling perspective it’s too early to actually have enough data to have an accurate estimate of that in the trial but the modeling looks like its coming at about 1.5% event rate.

And then another execution factor, how quickly are you and how comprehensively you are actually identifying MACE events getting them collected, getting them adjudicated by the committee and getting them into the database? So we are basically pulling out all the stops in terms of the execution factors. We've done a very good job on enrolment and we are focusing now on identifying MACE events and getting them into the hopper for adjudication as quickly as possible.

Under these scenarios with a range of event rates that you could predict, from 2%, down to 1%, that leaves us to current projections occurring for the 87th event in the interim analysis to sometime in mid-2013. We're not going to plan on providing ongoing updates of event rates themselves but we would of course plan to update generally on timing as information becomes available.

I am going to wrap up here talking a bit about the resubmission process in the US and mention our status in Europe. There is really two key points in terms of the resubmission for the Contrave NDA in the US. The first point is simply to make that there are host of activities that are involved not only in getting from the occurrence of the 87th MACE events to the actual resubmission because you got a pole in the data, duty adjudications as I mentioned to the interim analysis, have EMC look at it and then package it in.

On a parallel track, there are number of actions that have to take place because this essentially a full submission. You have to updated labeling medication guide as needed, safety updates, clinical trial and product development updates in a typical fashion, but what typically happen is all this gets put together and at the time of EMC reviews a data, it says go ahead, it looks good enough to go. Then all of that will get put together, you hit the trigger on your submission and that would start a clock of six month type two resubmission or review clock, ending in a PDUFA date six months later.

What we are in the process of negotiating with the FDA are the procedural details around making that a little more innovative, dynamic and quick. So what we would be talking about is actually asking the FDA to allow us to hit the trigger on resubmission of all of that ancillary or parallel information that has to take place in addition to the interim analysis.

So the update at labeling, safety updates, clinical trial and product development updates, start that early let the agencies begin to take a look at that and then drop in the interim analysis at an appropriate timeframe during that six month review, that’s a very novel path. We are very pleased that CEDAR is coming out of the FDRR discussion that CEDAR has been highly supportive of this and again we are in negotiations now with the FDA for that truly looks like from a procedural perspective but we would expect that that could save us potentially three to four months so a quarter or more in terms of our path to approval.

We have mentioned our filing plans in the past, I'll just provide a bit of an update. We have submitted a pediatric investigational plan. This is important because this typically one of the rate limiting steps overall in the approval timeline and we've submitted a letter of intent announcing our plan for MAA submission, this should be under a centralized procedure. So we would expect selection of a (inaudible) to occur next month of the CHMP meeting and then had a pre-submission meeting sometime in Q1 of next year.

Additional meetings with the (inaudible) either in Q1 or Q2 and we are anticipating submission in mid-2013. That would lead to a potential approval in 2014 again all that timing is dependant on timing of interim analysis and when we need to submit the cardiovascular outcomes trial data. So we can talk more about that as needed during the Q&A session.

So this is my last slide. Orexigen and Contrave reports to deliver. Contrave clearly is founded on the basis of a novel scientific discovery that drives strong intellectual property. It targets key areas in the brain that affect eating behavior and it had an efficacy in particularly in early responded paradigm that we will satisfy the market.

And finally what I am focused on and what my team is focused on is executing the Light Study to address what is the final, the single remaining approval hurdle for this compound. We believe that it has a high likelihood of success and thus far the execution is solid and ahead of schedule. So thanks for your time, and I’ll ask Mike to come back up.

McDavid Stilwell

Thanks, Preston. And we will see if the CEO has any problem with the construction is going in the building next door. The foreman tells us we don't but we'll see.

Mike Narachi

I hope from Preston talked you took away the these COR messages, first that the mechanism of action rationale is sound and at least to really novel IP which is unique and strong and differentiate it perhaps and from some of the other intellectual property, you typically see with combinations of existing drugs throughout the last 10 years or 15 years where we had some issues.

The Contrave story is very different; I hope you took that away. The responder paradigm and the efficacy again Preston said something really important, that I want to make sure people take away, and you will see that theme again in Mark’s section it’s coming after this brief section and that is that the market doesn't look at placebo subtracted numbers, think of the drug, any drug where the market thinks that way, what they want to know, physicians want to know is what's my chance or a shot at efficacy and if I achieved it is that efficacy meaningful?

And most drugs have actually pretty small effect size, some drugs they are blockbuster drugs, have like a 15% effect size here we got over half the patients they are achieving something meaningful clinically and that's what they are thinking about, what's my shot, I want to give you the try, it is easy to try, it is easy to find out, and I think that's the case for obesity.

And then last the past for regulatory success, I think it’s extraordinarily clear. This team worked hard to make that path clear and I think from the results that we've demonstrated if you give Preston and his team a clear path they can execute on it and I’ll say the results demonstrate that. And last I think Preston knows a hell of a lot more about the brand than Mark or I, so if you got questions about the brand definitely ask Preston.

I want to take us back now to 2010 before Mark stands up and talks about the market research and explain the rationale for our partnering approach for Contrave. The slide that I'm showing here is kind of a cleaned up version of a slide based on market research that was similar to the market research that we recently conducted where we took hypothetical product profiles for the late stage obesity therapeutics and the existing drugs in the market and we thought about the effect of large resourcing or promotion versus approved at first paradigm.

And we contemplated pursuing the path of the lower sales to start approving it first with a lower value share if you will, or keeping all the rights to Contrave, funding a small sales and marketing team with a contracted team and then later adding resources to try to approach the higher line. And with Mark’s experience and some of the analysis that we did, we made the decision, it’s not necessarily right or wrong because they both have pros and cons. But we made the decision based on our experience and the knowledge that we had from the market research to go ahead and get a partner that have the skill and the resources to get us on that higher trajectory early. Of course we gave away rights; we had to share about half the downstream value of the product with our commercialization partner for North America with Takeda, but that was a choice we made and we feel confident that was the right choice for the product and for our shareowners.

One of the reasons that we did that is how expensive and complicated a high quality primary care launch is. Here is a diagram that just shows you many of the functions that you need to bring to bear in an integrated fashion to do a good job especially in a primary care market where the physician audience is so large. So not only do you need a large number of boots on the ground in terms of your field facing personnel, but you need to support teams and the infrastructure and I think people often overlook that. If you’ve got 500, 800 sales representatives out in the field there is an enormous skilled team that has to be there to support them in an integrated way.

I'll just use one example from my own history in the launch of Aranesp. And its an often overlooked team of commercial analytics; so the commercial analytics team for the Aranesp launch and I'm sure the same is true here for Contrave launch at Takeda spends an enormous amount of time gathering information of the type that Mark’s presenting today and other information to create probably a year in advance of a launch a detailed plan dissecting complex buying processes. For the Aranesp case we are looking at how we grow the market, the majority of the non-dialysis market for anemia was untreated. So our goal was to grow the market with the entrance of Aranesp and to take market share from our entrenched competitor Johnson & Johnson.

And so we spent about a year just refining plans, looking at new data refining plans and then a year post launch constantly tuning exactly what we are doing in the field with that commercial analytics team. Critical, highly skilled people that are necessary as part of this overall integrated team; ultimately we tremendously grew the market with the late entrant, 11 years post launch of EPO, Aranesp and we took about 55% of the market share in the non-dialysis markets in about two years. So that was a success story, but it really impressed upon me how important all these kind of unsung heroes in the office that support the field are and highly successful launch.

So the different case study, this is a study that I think is relevant. It's probably one of the only that we know of where a small company in this case Kos was launching a primary care drug, a new entrant, an HDL raising drug and trying to prove it first with a small sales force. Now they you can see on the top left hand graph, this is the sale trajectory. The drug ultimately became a big success, approaching nearly a $1 billion, but it started out slowly, it started out focused on specialists and they incrementally added field resources. The big inflection first came when they did a contract sales rep deal. Then they did co-promote with Takeda for about three years and then ultimately, the company was acquired by Abbott and Abbott continued to add resources, so with those addition of resources, the product was able to get to its higher sales trajectory, but it's challenging where the small number of resources.

So back in 2010, we started a structured and competitive partnering process where we set a timeline, a dead line for when we needed a partner in order to make sure that partner had adequate time to get ready for launch. At the time, our PDUFA was set for the end of January, beginning of February 2011 and so we wanted to consummate the partner deal in September and we stuck to those timelines and we were able to drive a competitive process; think how challenging that was. We already had two AdCom’s that didn’t go very well and it was just weeks before this sibutramine and lorcaserin AdCom; so we had one AdCom that didn’t go well and two that were coming. And the Contrave AdCom was set for December but still we consummated the deal and the way we did that was we settled low initial upfront payment of only $50 million, kind of a low cost option to buy into the Contrave commercialization opportunity for North America.

But what we ask partners to compete on with a commitment because we wanted to get our share of the highest possible sales line. So the process was run on the basis of commitment to doing a great job with the launch. Again, competitive multiple partners at the finish line and we also wanted to retain key strategic rights as a requirement of the deal, so that we could have optionality in subsequent transactions, in rest of the world transaction and often small companies find themselves in kind of a partner purgatory with large companies and we from our experience and talking with others and various kinds of deals we have avoided that with these key strategic rights.

So the partnership that we did strike with Takeda, we are very, very happy about it. They have been a terrific partner through all of the last couple of years including through the regulatory processes for which they have personnel and relevant experience. The partnership is aligned with incentives. They have got great scale to bring to bear. There are multiyear, this is unique I think most contracts with commercialization agreements have commercially reasonable best efforts or certain diligence terms that are little subjective. What Mark and the team drove was very specific commitments to resources where there a contractual commitments to a very specific number of first physician details; the amount of effort that the sales force has to put forth.

If you look at those details it translates to a minimum of a reach of 50,000 prescribers in the primary care universe with high frequency. Now Takeda needs to optimize the reach and the frequency to decide how far down do they go, do they go to 60,000, 70,000, 80,000, 90,000 physicians with a certain frequency or do they stay higher with a higher frequency; that’s something that the analytics will drive that decision making process.

Marketing spend is specified. These are all commitments for the first three years of the launch and the sales force incentive compensation structures specifically outlined, so that Contrave maintains a dominant position in the incentive compensation structure because that’s how sales forces behave, they behave very rationally with their incentive complain.

The royalties start at 20% and tier up with increasing sales to 35%. There is about $900 million in sales milestones that kind of smooth out the value equation for sharing of the revenue of Contrave and about $100 million in milestones between approval and launch. Takeda covers all commercialization costs and Takeda reimburses fully for all manufacturing costs and pays the majority of most of the post approval development costs, so this is a deal that doesn't challenge our cash balances post approval.

Now I want to introduce Mark Booth. Mark came to Orexigen; his last job actually prior to Orexigen was president of Takeda North America where he oversaw all the commercial operations in medical and scientific affairs and business development. Mark’s history had him launching several primary care drugs, all of them with co-promotes; all of them in competitive markets and all of them became blockbuster therapeutics.

So without any further delay Mark tell us about the market research.

Mark Booth

Well thank you, Mike. We worked through construction noise, loss of audio, I am a little worried; I am getting setup for a lightening strike here. But we will see how it goes. Speaking of lighting, hats off to the clinical team for getting Light Study done at truly light speed and just as Preston has expressed confidence in the outcome of the Light Study, I am equally as confident that commercial is poised for success in the marketplace, of course assuming approval.

As Mike has mentioned, I have had the chance to launch a lot of drugs, most of them have gone well, some of them haven't gone well. You will learn from all of them, with hands on involved in three different drugs that all went through multi-billion dollar status. All but three different companies, two related to Takeda as a matter of fact. When I was at Abbott as Vice President of Sales I was intimately involved in the Prevacid co-promotion which was between Abbott and TAP which at the time was a 50-50 joint venture of Abbott and Takeda, moved on to Immunex and their Enbrel became a very successful drug that was Immunex and Wyeth and then when I became President of Takeda of course was heavily involved in taking Actos to a $3 billion drug about the time when I left. That's recently gone off patent, but that was also in a partnership between Takeda and Eli Lilly.

So its one thing to launch a drug well, its another thing to launch a drug well in a partnership, and I'm convinced Contrave is going to be next in that hall of fame line of block buster drugs, and I'll tell you why. One of the things you learn is that if these four building blocks are in place, the drug usually does pretty well and I usually sleep pretty well. Big market, growing market, that's a really good thing. You need unmet need in the marketplace because that speaks to the opportunity and usually with unmet need comes along limited competition. That's clearly the case here. You obviously need your product to have a differentiated product profile and it needs to meet needs in the marketplace, and then finally none of those other three things matter unless as Mike had mentioned you got the commercial expertise and the resources and the infrastructure to bring that drug to life.

I have seen average to good drugs actually do pretty well if they were resourced and promoted right. I have seen good drugs not do so well because they were under resource. I have never seen a drug sell itself. So if you don't have that last piece, you are in trouble. So let's talk about each one of these and go through it one by one and we will talk about not only how Contrave stacks up here, but a little bit about the other two new products that have then approved Qsymia and Belviq. We will start with the market. So you've seen this type of data before.

Market is huge, very under served. 222 million Americans total adults, 107 million of them target patients and that's expected to grow significantly up to 131 million by the year 2020. Yet only 2.1 million of those patients are treated today. 107 million target patients, 2 million treated. That results in about 7.8 million scripts today. All right and the vast majority of those scripts are Phentermine and by a vast majority I mean you know 98% to 99% of them are Phentermine, and as we go through the next couple of slides keep in mind this is the ball game in the obesity market. It’s where's this market going to go over the next five years, that will determine the success of Contrave and I would submit Qsymia and Belviq. This is not about three new drugs trying to steal share from each other. You get that in a well developed market. If you are launching the fourth or fifth drug in a well established market and in the same class; that's where you got to go out and try and cannibalize share to get your growth.

This is all about how big can we make this market, and if we make this a big market all the drugs are going to do well. So how do you get out where our market’s going to go? Market research is very important. You try and take a look at other drugs that have maybe been in that market. Not a lot of examples in obesity, and then you just kind of take a look at markets in general to see if where you think if it’s going to go if it makes good intuitive sense.

So I'm going to spend quite a while on the market research. We went out and surveyed a 1,000 physicians, in-depth market research. But the first questions we asked them were about the market, and the way you get a market growth in this market research, is you ask me a couple of questions. The first question you ask them is how many of your currently eligible patients are you treating today and you can see what they came back with here is they are only treating about 25% of their eligible candidates for obesity. That represents obviously the potential for 4x growth rate.

So the next question you ask them is an obvious one. After taking a look at the profiles of the three new products, where do you see your prescribing going in the next five years and what they came back with and they said they were going to treat three times more of their obese patients over the next five years, based on new products that offered better options, obviously the ones that you are dealing with today. So then you kind of put it all together. You got 4x in terms of eligible patients, 3x in terms of where they see their prescribe going. Again not a lot of good examples in the obesity markets to take a look at. Actually, Xenical did very well in it's first year. They had a very nice uptick in this first year. Obviously side effects caught up with that product. One example that is out there that is pretty impressive was Redux and within a year of the Redux launch, their TRX volume tripled from 1995 to 1996. I think showing what can happen in this market place with the right kind of product.

So, overall, I clearly see this market growing three to four times. I think it actually has the potential to grow more than that, but I think three to four times is a responsible projection and I just want to put it that in to perspective. We're not trying to break new ground here. We're not trying to do something that’s ever been done. There is all sorts of examples in primary care of markets that grew three, four times after the introduction of a new drug. You can see them up here; Prevacid again is one that I was very familiar with. Prevacid wasn’t the first PPI in the market. It came in later, was it a good drug without a doubt very good drug. Was it well resourced, clearly well resourced? And the PPI market grew 3.8 times over the next five years after Prevacid was introduced. So and I am not going to go through all of these examples. The point I want to make here is that, this is fairly common in primary care. If you’ve got the right drug and it’s promoted correctly.

So where do we see this market going? Again just to ground everyone where we are at today, 107 million potential patients only 2 million being treated resulting in about 7.8 million scripts. Very interesting too and I think it speaks to the dissatisfaction in this market place. You’ve got average duration of therapy today at about three to four months, and then zero promo; this is obviously prelaunch of Qsymia. $3 million in promotion in 2009. I have spent 3 million bucks on coffee cups and pens and papers on a brand. So literally there has been zero promotion in this market and where do we see it going and moving forward. Well these three new drugs are going to drive a very different picture by five years or the year 2020 again we see the market growing to about a 131 million patients, still it’s going to take a while but with that 3x to 4x we will have about 7 million to 8 million patients being treated, resulting in about 30 million prescriptions.

And again how can this happen, while current writers will write more. You are going to have non-writers, they are going to be huge part of this market, we are going to talk a lot about them. They are going to start prescribing and then I think you are going to see the duration of therapy increased from that 3 months to 4 months, 5 months and 6 months as physicians have better products, more affective products, better tolerated products to work with. So that sums up our take on the market, and again as you sit out there and you wonder how these drugs are going to do, please keep this variable in mind, top of mind, where you see this market going huge driver.

And I’ll just talk a little bit about unmet need and how it pertains the competition. Preston did a great job talking about the unmet need in this market place. I think the linkages between obesity and diabetes it’s a poster trial for unmet need in this market place. If the risk for diabetes goes up, if you got obesity and your risk of death if you got diabetes and you are obese also goes up dramatically. That’s about as clear as it gets to me and what's been shown and what the people are really stand to get their heads around is 5% to 10% weight loss can change this picture, 5% to 10% weight loss can change this picture dramatically.

So I really do think with obesity where at this tipping point. People are understanding the consequences of obesity, it’s not just cosmetic. With serious health consequences associated with this and of course serious as Mike talked about serious healthcare dollars associated with this. So I think we are the right place at the right time and as you will see I think we’ve got the right drug. So the unmet need is there, you’ve got 107 million potential patients only 2 million of being treated and the one end of the spectrum you’ve got diet and exercise how well is that working for folks and on the other end of the spectrum you've got you know about a 100,000 patients a year getting treated with surgery that's certainly not a viable option for the vast majority of these patients.

What's really needed her for a large group in the middle for the vast majority of patients, they need some pharmaceutical options that work, that are efficacious and have a reasonable safety profile and you know to say there's limited competition in this market is an under statement.

I've worked in markets where you are going total with five, six big guy products you know, thousands of reps, hundreds of millions in promotion. Those are competitive marketplace. The legacy products here are unsatisfactory. They are not being promoted at all. Very important point here, this is an again three drugs all coming out around the same time in the same class.

Every single one of these drugs have a different mechanism of action. As Preston mentioned, that's got to be important in how physicians take a look at these drugs and when you see our market research you are going to see physicians are looking at these drugs for different patient types based on their mechanism of action.

And I think most importantly, and I certainly hope that happens, every billion dollar drug I have worked on I have had a billion dollar competitor along with me, that's how markets get built and the opportunity exists in the obesity market for that to happen as well.

Okay, let's get into what I think people are waiting to see and what we are very excited about and that's the results of our market research that we feel really differentiate Contrave in this marketplace. I'll get into the results but as I do I would like you to keep some kind of big common themes in mind.

One of them is market meaningful efficacy is obviously required here. If you are in the weight loss business and you don't meet what physicians and patients are looking for, you are not going to be around long. But you are going to see that all three of the drugs in my opinion cross that threshold, all three of the drugs deliver market meaningful efficacy.

So then what happens is different patient types emerge and what you are going to see is it’s the totality of the product profile that drives preference share both overall but really importantly within key patient segments that we will talk about.

This is a big picture overview of that market research that we did. I can tell you this is as good a market research that I have ever seen in any of the four companies that I’ve worked with and I think it speaks to how engaged we want to be as a partner with Takeda. This isn't going to be something where we take the drug and throw it over the [trans] and say good luck with it.

They are going to be driving the car but we are going to be in the passenger seat and we want to be a very helpful and valuable navigator. So, on the physician side we did two different studies. Once a conjoint, once a patient that profile analysis and then on the and with a thousand doctors and then on the patient side we went out and we surveyed 5,000 on label potential patients.

I'm going to start with the physician research on the two different projects there. The one is the physician conjoint, a little bit about the doctors that we surveyed. We have a mix of primary care physicians OB/GYNs and endocrinologist. The significant majority of those were primary care physicians that's where we see the market going and that's a big part of our launch strategy and then we looked at of the physicians that [drove] obesity drugs, anti-obesity drugs.

They were high writers of those drugs, medium and low and then very importantly and there were 800 of them of the 1,000 and then we looked at 200 non writers. They don't write any obesity therapeutics but they are big writers of other cardiometabolic drugs like diabetes, hypertension, dyslipidemia. They are going to be the future writers in this marketplace.

So again we looked at a conjoint and a physician, patient profile analysis. The deliverables there, a conjoint is all about going from preference share to market share to different sales scenarios and what you end up with a conjoint is your forecast. And we have a very detailed forecast. We're not going to show it to you that's confidential at this point but you will see preference shares on the conjoint. And then I will get in to other ones here shortly.

So let’s start with the conjoint. What is a conjoint? Alright, it is a prescriber choice exercise based on in-depth product profiles that result in preference share for the three products, Contrave, Qsymia and Belviq.

Little bit about methodology. So physicians, these large group of physicians, they were shown very in-depth summaries based on the package [inserts]. And then the physicians were asked to allocate their next 100, obviously eligible patients across the three obesity products.

And again as I mentioned, what that gives us is preference share. What is preference share? Preference share is utopia. Okay. Preference share assumes a 100% awareness, right? All 1,000 physicians were forced to be aware of the three products. They were forced to read the in-depth profiles of the three drugs and it assumes a 100% usage because they were forced to allocate the next 100 patients overall three drugs. So it totals a 100% usage.

Big difference from market share. A market share takes promotion into account. What market share tells you is you know, how is the product going to perform in the actual marketplace and the thing to keep in mind here is you can have a preference share, it will ultimately be converted to market share in the market, driven on promotions. So it usually goes down a bit. If you promote a product really well and you do your job right your market share is going to be very close to your preference share.

If you under promote a product or you are only tapping into a little of the market, your market share is going to be significantly less than your preference share, okay. What you are going to see today is preference share. And this is key, this is just a big picture summary of the product profiles that the physicians got to look at when they were making these decisions.

Now this is just a summary to give you an idea of what they saw. They saw very in-depth product profiles and as you could imagine they were very accurate because they are based on the known labels in the case of Belviq and Qsymia and we are highly confident of what the Contrave label is going to look like.

So we thought that the accuracy on these labels were really good and you can see the overview here, they knew what the brand name was, they knew what the chemical name was, they knew what the mechanism of action was. For efficacy as Preston mentioned, we use computer data at one year because physicians don’t think in terms of placebo subtractive weight loss. I also think it’s the computer data that’s you are going to see in the promotional setting with representatives talking to physicians.

Vital signs obviously changes from baseline we looked at, blood pressure, heart rate, side effects, CNS and GI. We looked at teratogenicity risk, we laid that out, right down to if the drug is scheduled or not, dosing regimens, dosing titration regimens if appropriate.

So a very extensive overview of the drug and it was really important for us for this to be accurate for two reasons. One, we are making important decisions with Takeda off of this data and how we position Contrave in the market. Two, we are sharing this data with our rest of world potential partners and you conduct they are putting this data through the mill with their marketing teams and their analytic organizations. So it would have to stand up to that type of scrutiny. So we are very comfortable with the profiles that we presented.

What I am going to show you next is the overall preference share that you get from this conjoint analysis after physicians look at these profiles. And here it is, you can see that's Contrave wins but not by much, all three drugs did pretty well, right. Contrave win at 34.6, Belviq at 33.3 and Qsymia at 32.1. What are the takeaways from this slide? I think the takeaway is what we have mentioned and really what we've always said physicians are existed about all three of these drugs. They are desperate for some new tools and they are really happy, they are going to get three drugs with three different mechanisms of action to choose from and they are going to find a place for those three different drugs based on mechanism of actions.

The other point I want to make here and this is really important, these are the 800 writers that we survey, okay. These are doctors that are comfortable and familiar with Phentermine and Xenical. While, they make up the majority of our market research, they make up the minority of the future marketplace.

The vast majority of positions that are going to turn Contrave into a billion dollar drug are in any of obesity medications today. These are clearly physicians that have a good comfort level with the drugs today and I submit to you that their safety and efficacy comfort zone is pretty aggressive.

So that sets up my next slide. The next question is obviously, this is what the 800 writers look like, what do the 200 non-writers looks like? What are these doctors that represent the vast majority of the marketplace look like. Here you can see a very different story. You can see Contrave is significantly favored with these physicians; 55.7% preference share followed by Belviq at 30.1% and Qsymia at 14.2%. And as I mentioned these doctors are going to represent the vast majority of the future marketplace and I submit to you that these are more conservative physicians. They have got a different lens when they look at safety and efficacy on these product profiles and they clearly find the overall profile of Contrave very attractive.

And this is why those non-writers are so important. This is really how any drug performs overtime you know 12 to 18 maybe 24 months and this example we've shaped a bit to the obesity market. You are going to have likelihood to prescribe that spans you know about five different segments over your entire physician audience. You are going to have those docs that are going to use the drug on an experimental basis if they can and clearly in this market you do a lot of components are available generically. Those are the little ironies of the world right, the real innovators, but they are very small group of physicians.

Then you are going to have the early adopters. They are going to use the drug as soon as they are approved. And that's what will determine the current writers. Its my guess that's where Vivus is at with their 150 rep sales force and they are calling on the writers today, the 15,000 docs that are writing and you know maybe some other specialists and some primary care physicians that really, really make sense. But the vast majority of this marketplace is going to be a little bit more conservative. You are going to have a big group that's going to use it maybe after they hear from a KOL and certainly after they receive some investment in terms of education. Sales rep calls, medical education events.

Next group even a little bit more conservative. They are going to wait until same thing with the KOLs and the medical education and the rep calls, but after some colleagues have tried it and you've got there most conservative group out there that will use it after it becomes a standard drug. My point is, you want to make a drug a big drug you definitely have to cover those current writers, but you also have to make a big effort with the current non-writers. That's where the vast majority of the market is, as Mike had mentioned that's the reason we did our deal, our partnership with Takeda and I'll talk to you a little bit more about promotion, but I can tell you we are going to be in both buckets. We are going to be spending a lot of time with the current writers, but we are going to be making big investment in the current non-writers that we think will turn into big writers.

Okay so that wraps up the conjoin; you might have seen a little bit brief but keep in mind where the conjoin takes you is to market share and into scripts and into a sales forecast and for proprietary reasons we are not going to show you that forecast. But this next exercise that we did is going to give you a lot of insight as to how these products stack up and why and that's the patient profile analysis and segmentation.

Little different methodology here, all right; physicians again have the product profiles in front of them. The same in-depth product profiles, but then they were shown specific patient profiles based on eight different variables. And then all of this data and they are looking at multiple patient cards and I am sure you will listen in a second and it will become clear. But then all the data is stored into a stimulator and it spits out 384 different hypothetical patient types and it will estimate the product preference share for each one of those 384 patient types. And obviously the insights you can get here is where is Contrave going to have an advantage and in what type of patients. Where are we kind of, you know, splitting and doing battle with Qsymia and Belviq? Where do the competitors have an edge and most importantly, why? What is driving physicians to make those decisions?

So here is an actual example of a card. So again, physicians very comfortable with the drug profiles, then they are given a card like this and they receive multiple cards. So we will walk through this. There is a female, 20 to 39 years of age; BMI in the 30 to 40 range, challenging the patient, right? Diabetic, hypertensive, depressed. Not on opiods and no other cardiovascular diseases. And then the physician was asked the question you see on the card, thinking of your next 100 patients with the same characteristics, how would you allocate them among, you know these products?

All of that is thrown into the simulator and obviously the simulator will then kick out a preference share for you based on the patient type. But where really it gets interesting is let’s say you’ve got, that's interesting, you know, a bunch of doctors evaluated their patient type. There is the preference share and wonder what would happen if that patient was a male instead of a female. You can toggle at variable and you will get that preference share and that’s where you can really start to figure out what's driving prescribing habits and what's driving the way physicians are thinking.

So here is an actual patient profile. This was always the patient we told the investment community. We thought Contrave would do really well in. You know, female of child bearing age, 20 to 39 years old in that middle BMI range and I will show you how we're breaking BMI out, but 30 to 40, diabetic, not hypertensive, depressed, not on opiods and no other cardiovascular disease. These are the actual preference shares that kicked out for this specific patient type; one of 384 patient types. And you can see Contrave did extremely well in this patient type with a 50% preference share compared to about 28% for Qsymia and about 23% for Belviq.

So just like with the conjoin exercise which was a really top down approach right, where you ask physicians to think of all their patients and how will they use the drug; you can get an overall preference share here too, the only difference is it’s a bottom up approach right. You are taking all those 384 patients you are summing the preference shares and you can get to an overall preference share with this model as well and that’s what this shows you; it’s across all patient types. And you can see Contrave separates a little bit more here with a preference share of 38%, the other two drugs also doing very well, Belviq at 31.5% and Qsymia 30.8%.

A point I want to make here though and it was the confidence builder; it was great that this type of approach, this bottom up approach confirm the top down approach. We were a little bit worry if we would have saw kind of one set of results from the conjoin and a very different set of results from the patient segmentation, so it’s kind of confirmation confidence builder say have the two different big pieces of work come up with pretty much the same outcome.

So now really start to play with some of this data and show you what it can do. We are able to take those different variables right, as age or sex the diabetes, BMI types and take a look at them and see how things change and see what’s driving what. This is just to give you an example this is age, alright, so how does preference share change by age in physicians mind, and you can see you know for Qsymia it really doesn't, age doesn't come into play, when the doctors thinking about Qsymia, pretty flat across the four different age groups. Same thing for Contrave, nice flat preference share; it doesn't matter how old the patient is, kind of interesting with Belviq; Belviq looks like definitely a higher preference in the younger patients and that preference works it’s way down as the patients gets older.

Now let's get into some that I think are really going to play into how these drugs are positioned in the market, let's look at gender. These are the preference shares for the male patient and you can see not a lot of separation there right, 34.8% for Contrave, both Belviq and Qsymia right there at about 32%. So when it comes to this male patient, doctor’s now really making big trade off decisions here, but what happens when it’s a female patient.

Here you can see real trends emerging here; you have got Belviq pretty flat, so gender not allow issue with Belviq. Qsymia, a definite drop you know from 32.5% down to 28.1%, I think that's the clear reflection of the teratogenicity issues associated with Qsymia. And then you see Contrave doing very well on that female patient type trending from 34.8% in male, and up to 40% in the female and again I think that's a reflection of the lack of teratogenicity associated with Contrave. So you can really see these attributes that each product has playing out in preference shares and how physicians are going to prescribe the drugs.

Let's take a look at why that is so important; well, in this obesity market today the vast majority of prescriptions go to women, and a lot of those women are women of child bearing age. I think over time you are going to see that even out more, you are going to see more males come into the market, because there's just as many obese males as there are obese females. But in the beginning here in these first few years, whatever drug has an advantage in this female patient I think is going to be well positioned and that looks like its Contrave. This is another real interesting one. This is BMI. So we broke BMI into three categories the 27 to 30 obviously to be on label here this is an over weight group, but they have a co-morbidity. 30 to 40, BMI range and then 40 plus.

So let's take a look at how the three drugs do here. Belviq does extremely well in that 27 to 30 BMI range, and it starts to come down as the patient becomes more and more obese. I think that makes sense given the efficacy profile associated with Belviq. Probably makes a lot more sense there to use them in that 27 to 30 group and physicians are going to look for a little bit more efficacy if that patient gets heavier. How do you think Qsymia works? Exactly the opposite. Very high preference share in that 40 plus patients, comes down as you hit the 30 to 40, and really drops off in that overweight with a co-morbidity group of 27 to 30. Again okay so I think what you see here is physicians making efficacy and safety trade-offs and being more willing to play one way if the patient’s 40 plus and more willing to go the other way if the patient’s 27 to 30. But we are really pleased with on how Contrave came out on BMI was very strong preference shares across every single category 35% in the 27 to 30; 41% in the 30 to 40; and 36% in the 40 plus.

So regardless of what BMI range that patient falls into, physicians are telling us Contrave is a good choice. Why is that important in the market? Well, this is how the BMI range should shake out. You've got about two-thirds of the market in that 30 to 40 BMI range. You know 64 million patients reside there, 20 million in the 27 to 30, and then only 14 million in that 40 plus range. And again these are just the preference shares that you just saw layered in, and you can see Contrave with a dominating preference share in that 30 to 40 range and then you know another trend comes out here that is really interesting and you will see it in future slides. What Contrave doesn't win or it doesn't come in first is what I would call a competitive second. While on the other hand you will see Belviq and Qsymia often on opposite ends of the spectrum, depending on what variable that you are looking at.

So Contrave seems to be really well positioned as a first choice, and where its not very strong second choice. And you will see that pop out as we move forward. Yeah this is great. You can go crazy with this data. What we wanted to take a look at was okay 384 patient types. Show me the top 10 in terms of preference shares; show me the top 10 patient types for the three different drugs, and what you see here we will start with Belviq. Again down at the bottom you can see their preference share for these top 10 patients, 53%.

So physicians really like Belviq in these patient types, keeping in mind that their overall preference share was 32%. Contrave again, and just about every case, you can see over there, we come in, we come in second, Qsymia comes in third. What jumps out at you here with these patients? Well, all in 27 to 30 BMI range, which ties right in to the variable trending that we showed you earlier when we looked at BMI. I think it's also interesting that, pretty much across the board, no one for depression. Yet one yes in there for depression. I think that makes sense too when you look at the Belviq label and there’s obviously concern using Belviq with an SSRI in the label. It doesn’t make sense to use Belviq in a depressed patient. So I think the depression scores here are interesting as well.

About Qsymia. Again, these were patients that physicians really like Qsymia and their top 10 preference share was 48% compared to their overall preference share of 31%. Again, Contrave was the competitive second choice here in this patients coming in at 34% with Belviq a distant third at 17%. Things that jump out of the air, almost, all male. You see two female patient types at the bottom in an older age range, probably non-child bearing age range. All BMI 40-plus. You know, so I think again speaking to the efficacy profile associated with Qsymia. And again, depression pretty much across the board no. Again I think that makes sense with the concerns about needing the monitor and the label with a depressed patient on Qsymia. So it’s more and more validation the way the label stack up and how physicians are going to think about different patient types.

And then you have got the top 10 for Contrave, here our overall preference share in our top 10 patients was 50% compared to 38% overall. Things that jump out here, all female, just about all of them in that 30 to 40 BMI range, some in the 27 to 30, and then interestingly a nice mix of depression or not depression which tells you doctors are very comfortable either way. The patients not depressed they are fine using Contrave, if the patient is depressed they are obviously also fine using Contrave which make sense because you have got a whole therapeutic dose of bupropion on board. So for a long time we have been saying Contrave is a logical choice for that obese depressed patient and this type of research really helps bear that out.

So those were just the top 10 in terms of preference share. The marketing mind automatically goes to well that’s need, but what about the top 10 most prevalent patient types out there which theoretically is code for the top 10 most valuable patient types out there. What’s going on with those folks and so we are able to match the patient types with (inaudible) data to get prevalence which you see on the far right hand side. So interesting if you just take a look at the top two, they are actually exactly the same except one is male and one is female same age, same list of risk factors and those two patient types alone make up 50 million patients. The top 10 make up 27% of the market, 27% of the patients are in these categories. And what really jumps out here it’s interesting, mix of male and female, mix of age those are mostly in the 30 to 40 BMI group, but what do you see when you take a look across the other risk factors, all no’s; no diabetes, no hypertension, no depression, they are not on (inaudible), they don't have any other cardiovascular disease.

This is a group of patients that we have termed the uncomplicated obese, okay. This is where the vast majority of the market is, the uncomplicated obese patient. So the obvious question is who ever wins there is in pretty good shape in the market, and we were really pleased with the way the preference shares overlaid with this top 10 most prevalent patient types. You can see Contrave does really well in this patients types, 41% preference share, you got Belviq coming into 32% overall and Qsymia 27. I think Contrave actually comes in one number in eight of the 10 and two where it doesn’t, it’s second. So Contrave performs extremely well in these most prevalent patient types. I think the other thing to remember here is who is treating these patients, they are only complicated, they are not being treated by the specialist, these patients are seeing their primary care physician, and if you want to capture these patients, you better be calling on those primary care physicians.

So to wrap up the market research on the physician side, we clearly see this market poised for 3x to 4x growths. Contrave’s strongly positioned overall and in these key patients segments that we talked about, the uncomplicated obese, women, women of child bearing age, that’s very important even tough Contrave does well in every BMI group, very strong preference in the 30 to 40, the obese depressed and the obese diabetics. And I didn't show any slides on the obese diabetic because Preston was telling I was talking too much but our data looks very good there, skews very well toward the diabetic patient.

Preston showed you our Phase 3 data in the diabetic patient which is really good HbA1c results but I think what's really going to put us in the backward seat with the diabetic patient is that's Takeda’s real house right. Takeda made Actos a $3 billion drug by calling on physicians with a lot of diabetes products.

They are very excited about Alogliptin hopefully being approved maybe early next year. They are DPP-4. So they have got the relationships there. The reps are extremely trained in that market and there's a lot of synergy between Contrave and Alogliptin if it turns out that way. I can tell you right now those two drugs are sitting within the same marketing business unit. They are not in different business units where they will compete and not talk to each other. They are in the same marketing business unit where they can figure out if it plays out that way you know how do we capitalize on both these drugs and maximize the opportunity.

Other key takeaway you know where Contrave was not perverted with frequently a competitive second and then again you see you know Qsymia and Belviq often at other ends of the spectrum depending on the patient type and the variable and just a reminder again what we showed you today was preference shares.

Those will convert to market shares and whoever promotes the most is going to have a higher market share. Those that promote the least are going to have a lower market share. That's just the law of the jungle. That's how it works out.

Okay, let me turn the corner here and talk about the patient market research which is really interesting. You know, the pharmaceutical industry hasn't done at least in my experience a lot of patient market research. It depends very heavily on physician market research because they are the gatekeepers, right? They are the ones that are going to have write the prescriptions. So this was kind of new for me as well.

And I'll tell you upfront, if a question comes up well how do you benchmark this against other pharmaceutical products? It’s almost impossible to do because there is not a lot of data to compare it to. But we did get and this isn't really a preference share, it more quantifies interest, the patient interest in the three drugs.

So all the background here, its all very recent data, by the way there are physician data we did was also done pretty much in the same timeframe so its very recent data. This was done September 7 to September 24. It was an internet survey; we got 5,091 patient surveys back. And a big difference here was that the patients obviously reviewed a much more simple profile, more suitable for a patient than a physician and instead of looking at all three and making trade off decisions, they received one patient profile.

So about 1,700 patients got a Contrave profile, about 1,700 Qsymia and 1,700 Belviq profile. So they were commenting on that specific profile. The company we used to do us research is very scaled; they work a lot with consumer products but also have great pharmaceutical expertise. We got great data.

This is just some of the demographic breakdown of the 5,100 patients, very even mixed between male and female. Pretty representative be on my range there about 15% of them were diabetic, about 30% had hypertension and then you can see how the age range played out from 20 all the way up to 60 years of age. And so this is again, very different, how do you get at how a patient feels about a drug. What you do is there is different measures that you asked them about and this is pretty representative of the measures that measure interest.

You ask the patient, you know, how likely would you be to ask a doctor about this product? You know, how interested are you in taking the product? How much do you like and want the product? And then lastly, this is apparently a very important one, it's called talk value, you know, how likely or how willing would you be to tell others about product? That’s kind of a measure that can make a drug go viral if you will where one person that’s on he will tell another one, and I will tell another one and they will start going to their doctor and asking for that drug.

And then the way patients respond to those measures is they got five different responses they can chose from. Definitely interested, probably neutral, probably not or definitely not and in consumer market research, it's all about the top two boxes. That's you want to measure how you do in top two boxes in terms of overall interest and then you want to compare your top two box score with the competitor top two box score. So what you will see on the next slide is how are the drugs do with the top two box scores?

And this was if you put all the data on one slide, Contrave did extremely well. I was preferred across the board and the ones that really popped out to me were you know, liking the product, thinking the product is unique, wanting the product and then you know, I would tell others about this product.

All of those were statistically significant at the 95% confidence interval. So, Contrave came out very well on the patient front. I was also able to show you the demographics. So one of the things we wanted to do was take a look at some of the key segments the physicians that they favored Contrave and see if the patients felt the same way, that would obviously be a good thing and that’s what came out here. Women and women of child bearing age, all had a high preference for Contrave.

And then women or all patients overall patients male and women in that 30 to 39 BMI growth preferred Contrave either at the 95% confidence interval or the 90% confidence interval depending upon what (inaudible) measure that you are taking to look at.

So where the physicians are telling that Contrave is a good choice the patient seem highly interested there as well. What didn’t patients like? And this is for Contrave but I can tell you this is representative pretty much across all the products. And I don’t think there are any surprises here, if all patients are concerned about side effects and when you try and take a label and put it into a profile for patients to take a look at, that kind of be some scary stuff. All you need to do is listen to a pharmaceutical commercial on TV, right? And hear the fair balance and you go whoa, drug interactions were a concern to some, some just don’t like taking drugs in general and would rather diet and exercise.

And then there is some skepticism there which I think is warranted, vast majority of these patients I am guessing have tried other weight loss strategies and probably had less than optimal results. So some skepticism came through as well. But I think to wrap up the patient piece of the research, I think the open ended comments on Contrave tell the story, the amount of weight loss they saw in six months by the way for patients we just took the computer data and cut it off at six months to shown what they can get you know instead of year at six, they seem satisfied with. I think the last two quotes tell the story of this entire marketplace. I have tried everything to loose weight and I am desperate for something new and I am really interested in this drug because it could help save my life, and let's get back to that tipping point we were talking about, patients are desperate, patients want help, patients want new options and they are understanding that if they don't get, if don't tackle this, there is some very serious health consequences associated with it.

Okay, this is home stretch; we will close on the commercial expertise and resources. As I mentioned; I focused on this a lot, because that's been my background. And if this isn't there, the top three boxes don't mean much.

And it really represents why we partnered as Mike said, and why we thought partnering with Takeda was an ideal partner. Again, very important and how structured it Mike when over it, the multi-year contractual requirements with sales calls, work with this incentive plan and the marketing spend, multi-year, okay, our approach was, we didn't want to take a specialized launch approach, we didn't want to take an incremental approach like Mike claimed out with (inaudible) even though you can get there.

Our whole approach was let's find a partner who is willing to throw a lot at Contrave that believes in it, and is willing to, the first 12 to 24 months of any drugs launched sets a line and we wanted to set that line as steep as possible and then once this contractual commitments run out, if Contrave shooting up like a rocket, Takeda is going to continue to resource it that way. So that was our mindset and Takeda really stepped up and I'm not just saying that because I spent eight years there and I think the world or the company, they put forth a serious commitment, but more than that they are a great strategic fit. You know they have got the scale that we are looking for, a big US presence, a very strong US primary care franchise. They have got good domain expertise in the cardio-metabolic area. I think very importantly, Contrave isn't some bolt-on to Takeda, some strange they don't know what to do with. This is part of their stated strategy and they are very interested about the synergy between obesity and diabetes. And then they have done it, they have been there and they have done it. They have built multi-billion dollar primary care drugs in Prevacid and Actos and that to me carries an awful lot of weight.

The last thing I will say about them is again I was involved in two partnerships with Takeda, one where it was our drug Actos, the other one Prevacid where we were the co-promote partner. They are great partners. They take partnering very seriously and what they usually sit down at when they sit at the table its about okay let's not worry so much about this line in the contract, what's the right thing for the drug and then let's figure out if we can find a way to make it happen. So we are just, we are very pleased with them as a partner across the board.

Mike showed you this slide, but I want to reemphasize it, launching a drug, any drug is a really complex expensive, comprehensive undertaking and it has to be integrated. You can't do things piecemeal. You have one shot to launch a drug right and if you ever hear the term relaunch, run away, because that means something’s gone seriously wrong. Lots of pieces here; you need your managed market strategy in place to begin driving reimbursement. Patients and professionals; we are going to have to educate both patients and physicians in this marketplace. That's really clear. Sales strategy, everybody wants to talk about boots on the ground right; how many reps you are going to have, how many physicians you are going to cover. We will talk about that, but let me start a little bit with managed care and again Takeda’s got a great managed care organization; it’s extensive and if you take a look at what they did with Prevacid, what they did with Actos. They know how to drive very strong reimbursement levels.

You know an interesting situation we are walking into in terms of reimbursement on the obesity front, but you know it’s not as bad as I hear from the lot of people. If you take a look at where Meridia and Xenical are at; you know back in 2009 there's two different data sources here one is from Managed Care Magazine the other was from a market research that we actually contracted back around the same timeframe with pharmacy directors; you can see about you know 35% to 45% covered lives; that were covered for weight loss brands. Now albeit two or three, but that's okay. You start at two or three you get coverage and you work your way up.

I think we are going to get back to these levels pretty quickly given the tipping point that I was talking about, but the question is how do you go from 35% to 40% to 50%, 60%, 70%, 80% and that is a process. Our job is all about you know its kind of crawl, walk, run but how do you accelerate that, how do you condense that to make it happen as soon as possible. I think there is a few drivers we are talking about.

First and foremost what a lot of people miss is the biggest driver for reimbursement is demand, okay. You drive demand, you are going to get coverage and it’s a big reason most managed care organizations won't even review your drug till it’s been out for six months. They want to see how it’s going to do, make sense. If the drugs being used quite a bit and physicians and patients are asking for it, they are the customers and interestingly enough, coverage usually goes along with that. The drug isn’t being used very much. There is not a real need to go out there and provide coverage. So driving demand is the first lever and again based on how we're going out with Takeda, we're looking to drive a lot of demand early.

I think employers will be another lever to pull here that will help short-term and mid-term. You’ve got a lot of employers waking up to the fact that obesity is killing them. It's hurting their bottomline from a dollar standpoint and it's hurting their employees and it's showing up with presentee and absentee rates going through the roof, all tied to obesity. Certainly, some employers are more progressive than others. That’s where you start, but when the more progressive ones come on board, it's like the doctor slide I showed you. Employers are going to be the same way. You know, the early adopters are going to jump on board and the rest of them will too, but it doesn't happen by itself. If you don’t have an effort going, they are not picking up the phone call and you, okay; you need to send very experience people out there to make that happen, Takeda has those people.

Then there is other big drivers right, like a big outcomes trial that can come out and show the mortality benefit to weight loss. Those things usually happen later on in a product’s lifecycle. After the drugs on the market, and revenues coming in and you can obviously fund that type of study, but a big one down here is that could flip, you know, sooner rather than later, at least by hope it will, your Medicare excludes coverage for obesity therapeutics. They have taken an important step, in 2012, counseling, obesity counseling was included. It’s a great first step and I think it shows momentum, but if we can change this, I think given what's going on in this country, this needs to change; that can be a big driver.

Alright, home stretch. Let’s talk a little bit about reps and everybody wants to know who has the most, what can they do, how many doctors are you covering. So just a little tutorial on the sales force and if you are looking for the source here, it’s 30 years of me, but this is pretty much at average that you can take to the bank. And if you think about the average rep, primary care rep they make about seven calls a day, specialty rep usually makes less, because there are fewer doctors to call on and usually in the specialty situation there is more drive time, you are driving around to get to the right people.

And believe it or not there is 200 working days a year to work with when you factor in weekends, meetings and vacations you’ve got about 200 days to work with. So that’s 1,400 calls per rep, per year that you are dealing with. As Mike mentioned it’s a strategic decision on how you allocate those; you can have a whole bunch of targets and call them very frequently, we can have very consolidated group of targets and call on them really frequently that’s a strategic company, a strategic decision every company needs to make.

But then you take a look, most people tell you need to see a doctor about 12 times a year to get your marketing message across, to get your educational message across. It’s going to vary, you are going to see more productive physicians more; you are going to see less productive physicians a bit less, but in general just kind of accept 12 as an average frequency. So if you do that you can do that math, you got 1,400 calls to work with, 12 calls per doc; an average rep can cover about a 120 physicians effectively in my opinion.

So then you layer that into different sales force sizes, if you’ve got a sales force of a 150 like Vivus does, you have got about 210,000 calls to work with frequency of 12, you can really effectively calling universe of about 17,500 physicians; kind of the current writers today. They are the current significant writers. You go up to 200, you can see if you can jump off using the same math about 23,000, to 24,000. The only way you get at what I would consider primary care kind of launch numbers is to have somewhere between 500 and 750 reps on your product; 500 reps will get you to 60,000 doctors you can call on, 750 get you closer to 90,000.

As Mike has mentioned, we have to lock into exactly how many that were going to, but we have communicated 50,000 plus; 50,000 is not the average there, 50,000 are minimums and absolute minimum we are working out what is the right reaching frequency and that will drive where in this kind of blue box that we end up, but we clearly being more down in that bottom segment than which is a primary care launch kind of scenario versus the upper segment which is much more of the specialty launch scenario.

And this is why this is so important; let's take a real market and then the next slide I compare to obesity. This is the diabetes market today. You have got and the scripts broken up by deciles, so for those of who aren’t familiar with deciles, it’s just an easy way to take all the scripts in the market, break them into tens and assign them to the doctors that are driving those scripts. So let's take an example, the deciles for ten doctors in the diabetes market, there is 3,435 of them. They are driving 10.2 million prescriptions; really number to focus on there. If you are driving about 3,000 scripts per year, now that’s a group of docs you want to call on if you are launching a diabetes product, absolutely.

Let’s contrast them with the decile five doctors, okay, they are also driving 10 million scripts, that's why its call deciling; big difference here though, there are 13,000 of them, okay. They are writing 774 scripts per year. That is productive as the docile 10s no. Are they a group of physicians I'd want to call on if I was launching the diabetes drug, absolutely and you know my point is, is that if you just want to settle for those upper docile you are leaving a lot of scripts on the table in a primary care market. So let's turn it into diabetes. I've just got a couple of slides left. I appreciate you hanging with me. This is a key slide in my mind and it answers the question many of you have asked me.

So Mark just tell me how does Contrave become, how does any obesity drug become, but I like talking about Contrave so let's make it Contrave, a billion dollar product. What do I need to believe, what needs to happen to turn Contrave into a billion dollar product?

So couple of things we are jumping out to year six here. This is not a forecast; I'm going to put this disclaimer out here okay. This is not a forecast, but its something I think I can look you in the eye and tell you I can logically see happening with Contrave. So we are jumping out to year six that's when a lot of drugs kind of hit a peak sales number, right. This data over here that you are seeing is everything we just went through for the diabetes market. The numbers change a little bit because it gets ratcheted up because we are six years later, right so there's a few more docs, a few more scripts but basically you got 90,000 doctors writing 85 million - 86 million diabetes scripts. Okay, what would Contrave have to do in this marketplace and by the way if I was launching Contrave today and somebody said Mark what physicians would you call on, I'd call on these physicians. I think the doctors who are writing a lot of drugs for diabetes are the perfect doctors to call on and that will end up writing a lot of obesity drugs.

So what has to happen here? Well, you need 5.2 million Contrave prescriptions, all right. These are 30 day scripts, keep that in mind and we've got a price up here and again we are not releasing pricing. This isn't our price of 633 a day and you might say where 633 a day come from. Theoretically if you launched at about $5 a day and you are one you have a pretty standard industry average price increases of 4%. You are at 633 and you are six. Okay. So 5.2 million scripts gives you a $1 billion. All right, let's break it down even further. I love all the market research, I love all the complicated slides, but at the end of the day if it just doesn't make good common sense to me I don't buy it. These doctors, these 90,000 doctors would need to write 60 Contrave prescriptions per year, five per month. If they wrote five Contrave scripts a month, you’d have your 5.2 million scripts you would have a $1 billion in sales.

So think about just a logical progression and let's say in year one everyone of these doctors wrote one Contrave script a year. Year two they write two. Year three they write three. Year four they write four. Year six you've got six. Given this market, given the potential in this market, given the unmet need in this market, given that you've got 86 million scripts being written for diabetes which is a smaller market patient wise and obesity. This number is not unrealistic to me. It’s not unrealistic at all. So this is what you need to believe, if you think Contrave can be a $1 billion product. And I'll point out again that sure you can just focus up here and I think you can drive some pretty nice sales but, the diabetics market reflects what I think the obesity markets going to go. Docile 7 through 10 just 30% of the doctors, but there are 50% of the scripts. If you cut your line off there, you are leaving 50% of the prescriptions on the table. And this again, I hope reinforces, why we cut the partnership that we do with Takeda. Again we're not saying we're going to call 90,000 physicians, it will be somewhere over 50 and I am sure something less than 90. But we're going to covering the high docile docks, certainly the mid-docile docks and we will go down in the lower docile so that makes sense from reach in frequency standpoint.

So I am going to conclude with the same slide I started with. I told you that if these four building blocks are in place, the drug does well and I sleep well. I think they are firmly in place. What I think is that this market is poised to grow three to four times over the next five years. I know this is a market with unmet need and very little competition. It’s desperately in need of new options. I firmly believe that Contrave has a differentiated product profile that sets it up for success in this market place, and I am highly confident that Takeda has the expertise and the resources to make it happen. Thank you.

I would like to bring Mike back up for some closing comments and then I think we're going to go in to Q&A.

Mike Narachi

Thanks Mark. One thing that I am sure you took away from the market research which was eye opening when we did at the first time in 2010 and then it was reiterated at this time is that all three of these drugs within a totality of their profile can earn big preference shares, important preference shares, and I think because they all offered distinct, clinically and medically important value to the patient population. So I think that’s really clear I want to commend our colleagues both (inaudible) for breaking the logjam of approvals which is a huge milestone and I think indicative of this change theme that we are talking about here where change is inevitable and having the FDA approve these three drugs and that’s been a tremendous help to all of us, and now with one of them on the market another coming soon I think that’s going to help too, because as Mark showed that adoption paradigm where people down at option curves and looks like they are going to focus on some of the early adopters and then help drive and catalyze those adoption curves, and then I think with additional resourcing and promotion all three drugs have a potential to achieve high levels of sales.

And I think you also saw our strategy why we cut the deal with Takeda and why we are confident in that early effort that Takeda can really bring to bury it into the marketplace, and then it fits with what Takeda’s mission is where they are going with their products, where they already call, where they have expertise and experience. So if you are really confident about where we sit right now. And let me turn a little bit now to 2013, where we think we are poised for a great year. We have got plans in place and we are in dialog with the FDA where we will finalize that resubmission path where the combination of the acceleration of enrollment for the Life Study and the faster path of resubmission can shape potentially a whole year off of our original timeline. So we are going to finalize that path of the FDA when it becomes crystal clear exactly what that path is, we will be communicating with you I am sure, then we expect to have a Contrave resubmission right now our expectation is that resubmission would be the administrative package and lots of important things that need to go into that, and that will be supplemented by the interim data submission.

We are hoping to exercise the same pathway for the MAA submission, but whether that's with or without data for the European authorities, that submission process follows and will occur in 2013, and we will make major progress on our rest of world partnering process, where our strategy is to drive that process, like we did in 2010 to culminate around the time of the data. We think we can drive the highest value deal when everybody who is interested gets to look at the data and then make their decisions and place their bets, and we can drive that on time. They too can be ready for European and other important geography launches. And then there is a chance that we can get approval within the calendar year of 2013, depending on where we can get that data from the Life Study to drop into the application process. So the whole timing hinges on that and we showed you some ranges that are realistic given the population that we have enrolled and that we are hopeful that approve might even come in at the end of 2013.

I don't want to forget Emphatic our second obesity therapeutic. We have completed phase 2B clinical trials for Emphatic. It’s been on hold essentially as we have been watching to see what regulators do, on a side effects and safety profile little more challenging. The efficacy is terrific here, in this study. We showed weight loss approaching 10% in six month, there is an extension phase of the trail that show weight loss continuing out into a year with even greater weight loss, but again with an anticonvulsant in the mix with Bupropion, Zonisamide and Bupropion, there is some challenges there not at least of which is teratogenicity. So we were watching we are still looking at how Europe handle this and our commitment is to get partner ready, but we would not initiate expensive Phase 3 clinical trial development programs unless we had a partner to help risk share fund the clinical trials. So the real milestone there other in some of these low cost high value activities that we are driving right now is to make that part of the rest of the world partnering dialogue and that's already initiated so there's diligence going on, on both Contrave and Empatic.

I want to reemphasize that we maintained key strategic rights both the Contrave and Empatic. We have significant Contrave co-promote rights. Those rights survive in Orexigen potential change and control, that's important again you heard me mention that we didn't want to find ourselves in a place many small companies often do find themselves and kind of a partnering purgatory situation.

So we were very deliberate about some of these rights.

We maintain the rights outside of North America that's great value that we can add, now we move much further down and as I said we are going to wait for the data before we consummate that process unless someone is preempted with a really high value offering but we think that the best time to expect is post data and then the Empatic rights are encumbered globally.

This is another important point and I think sometimes unusual in smaller cap companies. We've got post approval cash flow potential that gives us a lot of optionality for value creation for either new products or other commercial activities. The visibility into revenue generating company is pretty near-term with a $100 million in milestones coming between approval and launch than the royalties and sales milestones and really not a lot of expenses. We've maintained a very small organization, 38 employees to-date. That might grow by 10 potentially 20 people over the next year or two.

The Takeda commitments on commercialization we don't have to fund any commercial costs. We don't have to fund manufacturing. We don't have a big R&D pipeline or research facilities. It’s a very low cost company and that gives us tremendous options that we can deploy with the predicted building of cash balances post approval.

And then again in summary, the Light Study tremendous success, a combination of the accelerated enrolment and the regulatory path that we've created through the dispute resolution process. It’s taken about a year off of the original projections and timeline that's added tremendous value to the program.

The market growth story that Mark told which I think there are several sources of that growth. Writers writing more, non-writers starting to write and potential extension of the duration of therapy on to more typical duration of primary care drugs versus the short duration that's out there now due to disappointment.

And then of course the preference share story that I think will be converted to market share by the resources that Takeda can bring. I think the key there again was all these products can do well in their segments but the Contrave is playing really well and really important in large segments in the market.

And the scale and the resources that Takeda is planning to bring to bear both through the contract and their own enthusiasm. I think its going to be a real change in what we've seen so far and really important to help drive overall growth which is going to help everyone.

And then last is cash position or P&L story. We are not setting out three-year P&L objectives or anything but I think a lot of you have done your own modeling and you can see that this is a smart story that delivers a lot of optionality to the company and to our shareholders.

So with that we are going to conclude today. I want to thank you for your patience through some of the noise from the building next door and also for your interest and your support throughout the years and I know we are going to switch to detailed questions and answers. Thanks for your patience sitting through a lot of information here. I am sure you will have a lot of questions and follow-up but I think, are we going to start, are we going to take a start with a break?

Alright, let’s keep going. And do Q&A. So our answers are withstanding between us and lunch. I am going Mark and Preston to come on up and McDavid.

Question-and-Answer Session

McDavid Stilwell

I am going to give him microphone and your questions would be immortalized on the webcast.

Unidentified Analyst

Mike, you talked about potential approval if everything goes well this year. Could that be the case even if you don’t get to have the process go, even if the process goes in a sequential fashion as opposed to the kind of fast track, you know, being able to file right after the data?

Mike Narachi

I think the potential for that is much less likely because we would have to wait then until we have the data to submit and the PDUFA clock would push out. So only under a scenario of a much higher event rate, on more like that 2% side. Would that be possible? So it's possible but less likely.

Unidentified Analyst

Could you see a scenario where you partnered it with somebody different than who do you going to partner, Contrave ex-US?

Mike Narachi

Absolutely, that's possible. You know, I think a key question for Empatic is out there right now based on the regulators point of view of the Phentermine/Topiramate combination in Europe. So what's the viability of Empatic in Europe? So Empatic shares cardiovascular risk currently. It shares teratogenicity concerns and with (inaudible) in general, there are CNS concerns. Now we believe that from our PHASE 2B data that the CNS concerns may be mitigated by the counter balancing side effects of the bupropion and (inaudible), the teratogenicity risk is going to be there and the cardiovascular risk could be addressed through the Light Study because the same dose of bupropion.

So we need to answer that question for Europe, it may all still be important to another geographies and of course the US as a proxy market it could be valuable in the US. So we don’t necessarily have to link it to the same partner, but it makes sense that if you are interested in Contrave you wouldn’t want to get someone else competing with you in a non-complementary way on the profile with Empatic. So, most of the perspective partners so far have asked for consideration options if you will on Empatic.

Unidentified Analyst

And finally question for Mark, Mark on the market research showed that the physicians really liked Contrave a lot on both studies that you did but the patients, the response was overwhelmingly positive for Contrave versus the other two drugs. Can you talk about the, you mentioned it was a simplified drug profile you showed them, what are the profile that you have on your physician study that you showed what was those, what do you tell them about the other two drugs and about Contrave? Thanks.

Mark Booth

So it was a simplified profile. We didn’t tease out specifically, so the question wasn’t necessarily asked what don’t you like from a scoring standpoint, but what popped out in general I think was teratogenicity was a big issue with patients and cognition issues were a big deal with patients.

Corey Davis - Jefferies

Thanks, its Corey Davis of Jefferies. I want to back to Preston’s commentary about non-responders and how do you avoid in early experience with Contrave that just gives you the Qsymia and Belviq non-responders and another part of that is if you are a non-responder on one drug, how likely is that you are going to be a non-responder on another drug, then I have another question?

Preston Klassen

I'll take the middle part of that. First, I think you know each of these drugs has different mechanism of action. I don't think we know yet necessarily, what the key drivers are in terms of Contrave or Belviq non-responder how likely we have to be responder to agents being see that over time, so I don't have the great answer for you, but I think the case where you have multiple agents that have different mechanism of actions, it increases you likely that something is going to work for any given patients. So I guess not sure that I understand the first part of your question.

Corey Davis - Jefferies

I am asking because I think it might be likely if the first patient that tried Contrave are just non-responders in general and that would be the first experience and that’s something that I don't think you want you want more patients that have been naïve for the other therapies and how do you avoid that kind of affect being thrown out of the gate. And maybe it’s not the case maybe they are more likely to work on Contrave if they haven't worked on something else?

Mark Booth

I will just comment on that, I think this market is so un-penetrated, there is not going to be a problem trying to find naïve patients. I do think we will probably pick up some patients where maybe the other two drugs they didn't work, but I don't think we have a trouble of running finding naïve patients and I also think unless the other two companies significantly expand promotion, we will be calling on a lot of doctors on and even calling on.

Corey Davis - Jefferies

Then second question, recognizing the whole point of Light is to just rule out a two-fold increase in cardiovascular events. How much does it hurt you if you don't show cardiovascular benefit, when you start negotiating with managed care and like push back and say well, there's no cardiovascular benefit there so why would we pay for it?

Preston Klassen

I think the point about superiority is first and foremost from an FDA perspective just as you mentioned we need to show, need to document the safety that we believe is there. We haven't seen that in terms of our communications we had with managed care payers that they are requiring you know a mortality benefit or that type of thing.

I think we've done a study, I think it makes sense to think about obesity therapies have potentially a long term cardiovascular or other kind of mortality benefit. I'm not sure that the patient population that we are enrolling in the Light Study is the right patient population to demonstrate that end. They have higher cardiovascular risk in general. They are in essence kind of farther down the line. And if you wanted to take a look at that I'd probably enroll a less of a cardiovascular, more of a preventative mode, so to speak. That would take a long period of time.

So again like we saw with staten therapies other agents, other therapeutic classes, I would hope that it gets built over time. I also want to be cognizant though even gastric bypass surgery the best case control evidence there doesn't suggest a cardiovascular modality benefit until at least six years out. So these are long-term propositions that would have to be worked through. I don't know if Mike if have any other comment about from the managed care perspective?

Mike Narachi

I think that's well said, but one point I want to make sure we all walk away with, the Light Study result let's say that our hypothesis in this shorter duration study, the truth or the fact would be that risk is one point, no risk. If the result happens by chance then 50% right could be above one or 50% below one; if we by chance see a result of 0.8 or a result of 1.2, those are identical results statistically. Most of us will misinterpret 0.8 as cardio protective and 1.2 as cardio toxic, but that's not. You know, especially the interim point, there's so little information those two results are identical. So I think we want to be careful and best practice and steady conduct will be, be careful with information during an interim that could bias ultimate study conduct. So overall, you have to try to be you know just realistic about what the interim result means. Interim result is a hurdle for approval and is very similar to diabetes where you are just ruling out that upper bound. But we are not going to know you know what approximates the true point estimate perhaps until the final.

Lee Kalowski - Credit Suisse

Lee Kalowski here from Credit Suisse; I have one question for Mark and one for Preston. I'll start with Mark. You talked about the obesity market potentially tripling or quadrupling and you pointed to some analogous examples. Those are probably all you had wide spread insurance coverage whereas its not the case now with obesity as you pointed out. To what extent does insurance coverage need to get put in place for a tripling or quadrupling? And then I guess as we think about slide 89 and 90, can you give us some sense for where prescriptions are going to fall within each of the segments; I guess as we think about the Obesity Society Meeting; they talked about at the higher BMIs using drug intervention and at lower BMIs they talked a little bit more about diet exercise and so forth?

Mark Booth

Yeah, so we did take a look at scripts today by BMI category and if you look at scripts today, if I am answering your question, right, about 45% of them are in the 30 to 40 group. About 40% in the under 30 group and the remainder, which I think is about 16% to 17% is in 40 plus group. So it doesn’t quite line up with where the patients are but it's similar.

And then in terms of your reimbursement question, keep in mind, every drug that’s launched starts off with no coverage. Every single one I know, unless maybe it's an oncology drug and really is providing just incredible value and this coverage is built overtime. I do think you are going to have to see coverage, you know, move over 50% to get this drug to kind of numbers that I was talking about, but based on the levers that I talked about, I see them getting there.

Mike Narachi

And I will add to that; Mark mentioned, there is an exclusion in Medicare law for coverage right now for what they call anorectics. I think that's a historical problem and misread of the situation that the drugs reviewed as lifestyle or weight loss drug diet pills. So it's actually excluded. And how does that make any sense given what we know about the crushing burden medically and economically of obesity. So take that and then look at the policy initiatives that we've been able to drive with our colleagues in this space thus far, including, health paragraph that was in the PDUFA V Reauthorization Bill for Appropriations where that was mandated at FDA coming with a plan to facilitate development.

I think all three companies working collectively on this problem already; I would expect to see some progress. It’s crazy for that to be there and it’s kind of a logjam right. Even though hardly any of these patients are really Medicare covered patients in the current RX market. If Medicare is we are paying for counseling and we will pay for drug and then we do the job that we expect to cater to do with employers who will have wellness plans, who have all identified obesity as a controllable risk factor they want to do something about, and you are going to see that walk or run paradigm as Mark mentioned. Obviously the better the coverage the faster and higher the market can grow, so that’s a real important focus.

Mark Booth

Yeah I just want to bring out one other point that I think can be a competitive advantage for Contrave, and awful lot of this is getting that patient through the first couple of scripts, and if they start seeing results and they are feeling good, they are losing weight, I think you are going to see strong refill rates. So those first couple of scripts are really important, and you take a look and abandonment rate of a first script, it’s pretty similar for any drug over a $100 a month, you are looking at about a 30% abandonment rate, but the next refill it drops down to like under 10 it’s like or 7% or 8%. So it’s all about how can I help that patient get that first script build and be willing to fill that second script, and I think couponing we start types of programs are going to be very important, but also again this market sampling can be very important to get that patient through a period of time, and because Contrave we don’t perceive it’s going to be scheduled and the other two drugs are scheduled we think we’ve got an advantage there.

Lee Kalowski - Credit Suisse

And then my question for Preston very quickly is it your expectation in Europe that CVOTs will be required for all or any obesity drugs?

Preston Klassen

First of all let’s say we don’t actually know what’s happen in the US. We had an advisory committee in March of this year around that topic, so we heard what the committee that to say, but we haven't heard what come out that from the US regulatory perspective. To guess I think with overall that is similar to that in the diabetes guidance, what we’ve seen in Europe in terms of diabetes guidance in Europe generally is not line for line to say, but generally it’s a similar approach. So my guess is that what ends up coming out of the process in the US will eventually find its way over from European regulatory perspective. So short answer is yes, but I think no one knows how long that will take.

Unidentified Analyst

Mark, do you have any thoughts on the level of compliance among the script writers for the responder requirement within the labels. What you anticipate that level of compliance to be and then perhaps more importantly do you think that it could affect loyalty to brand depending on that discontinuation rates as a result of that responder rate?

Mark Booth

Yeah, my sense is that the paradigm that set up is a good thing, it’s a good thing for physicians, patients and payers. You’re really setting up the therapeutic trail of the drug and its 12 or 16 weeks. See if it works, see if its getting results. If its not, get out off of it, quit paying for it, quit taking the risk. And if it is, those patients I think of large percentage of them will go on to expand the drug, so I hope I am answering your question right.

Mike Narachi

Maybe just addition to that insight we had, it was surprising now short the current or past duration of therapy was obesity RX versus chronic meds. Chronic meds you know 200, 220 maybe for diabetes meds in general. So compliance is measured how many continuous RXs do you get and they allow drug holiday to sort of market typical like a one RX you miss one or potentially two. For weight loss drugs it’s a lot shorter and I think that was because of your expectation that was set at their launch for quick results. And if you talk to people that were involved with the sibutramine launch back when I was at Nova and then acquired by Abbott and the folks from Roche on the life based inhibitor launches expectations were for quick results and they didn't get them and they abandoned.

The paradigm we have here now I think is incredibly helpful, because what its saying is be persistent, go all the way out to a fair therapeutic trial where based on data from receiver operator curves, we can have a high confidence on whether or not you respond there. A lot of people in our trials didn't become responders until a little later in that process of that 16-week process. Some had early response, some became responders later and we captured about 80% of them. So I think it does help drive to at least 16 weeks. Now 16 weeks for us is already at the average for historic views.

So then a responder I think becomes your annuity where there will be persistent. I do think that your question is higher proportion of responders for some drugs versus others will create more loyalty, yeah I think so but remember they are going to pick patients for that profile and you can see they are being fairly selective already and promotion might reinforce that depending on how people decide to try and reinforce the segmentation analysis that they all do. So I think yeah you might get a lot of loyalty with the segments that you are going after. But I think they all have meaningful proportions. If you think about effect size for many, many other drugs, how many people on an anti depressant actually feel better. How many people on an anti-inflammatory? How many people on any of the typical method they use. Effect size is a 50% or so are terrific. So I think they all have good proportions of responders.

Unidentified Analyst

And then Preston do you have any views as to what's being up regulated or what signaling pathway is limiting the efficacy of Contrave and why is it around that six months point. Is it duration driven or weight loss driven.

Preston Klassen

Yeah, I think we see with all agents out of the market that you tend to see about a [neater] or maximal effect at about six months and then you see persistence. We've shown persistence out to one year and not beyond that in our clinical trials and then the question is how long does that exist. You could see in the XENDOS trial the long term four year outcome there was kind of a later the six to 12 month time point and then a gradual return. But still always better than the placebo group. So you are still always better off with pharmacotherapy compared to not taking pharmacotherapy with in these long term outcome studies. So in terms of what mechanisms are in place, as I mentioned right the brain is wired. We are wired and we want to conserve energy. What we see stored energy because you know 1000 years ago we needed to do that in order to survive and we are just in a very different environmental paradigm today. So I think it speaks to and if you talk with KOLs I think many of them will say this is why you need multiple shots I'm going to need multiple targets in combination drugs that act through different mechanisms of bupropion and naltrexone getting things from a slightly different angle are more likely they have longer term benefit than perhaps a single isolated mechanisms. It’s why drugs may be used [transcimic] two time. You might try a drug and then after a certain period of time try different drugs. So I think it will be a variety of different options and more drugs you get on the market for patients to have and physicians to have opportunities to try to make some match.

Cory Kasimov - JPMorgan

First question. I would like to follow up on responder threshold topic and just wondering how you expect the real world experience to differ from the clinical trial experience for Contrave really for any of the obesity agent when you don’t have the same degree of hand holding taking place and then I have a couple of follow ups.

Preston Klassen

Interesting question, I actually think there is an opportunity from a commercial perspective and then I will let maybe Mike and Mark chime in on that to do more and what we were able to in our clinical trials and since for just two specific reasons. The first isn’t a blinded clinical trial. You get a pill, you have no idea. You got a placebo, sugar pill, or is that inactive. In an open label setting, you know what you are getting. You know you are getting an active weight loss agent, and we saw that in our, some of our phase 2 trial that were in fact open label, single arm right. So we did a small study in a patient with major depression. We wanted to make sure that there wasn’t anything about Bupropion naltrexone combination that somehow inhibited the anti-depressing characteristics of Bupropion, small study but open label. We had over six month period of time, I think, (inaudible) were getting 10% weight loss. People knew how we're getting the weight loss drive. That’s one fact.

The second factor is again we strongly believe that this is about more than taking a pill to get skinny. This is about a pill on a program that foundation is appropriate, life style modifications. So we do believe that your best offering commercializes any pharma therapy with a solid foundation for weight management program that can help to drive additional weight loss. It's something that we did not really do in three out of the four phase 3 trials that we did. And one, it wasn’t necessary a scalable program from a commercial perspective, but in one the Core [B] trial was state of the art. It's kind of like what is the biggest losers within a clinical trial setting. It's based on Tom [Waden’s] new internal behavior modification program and what you see there is significant increase in the proportion of respondents. So I think for those two reasons people are going to know they are taking a weight loss drug and if we can package it with the right weight management program you are going to see great results.

Cory Kasimov - JPMorgan

Great, and then for Mark you clearly had some impressive market research there, curious though what you might think are the main commercial impediment safety in Contrave obviously from macro (inaudible) reimbursement, but what are your thoughts on possible impact if any of things like the dosing or the early nausea the patient is experience?

Mark Booth

Yeah, sure I actually think the greatest impediment is just this markets been a wasteland for so long, and physicians while they are eager for something new they are probably also may be a little bit skeptical as well, and the way you get at that again it doesn’t happen on its own, its resourcing, it’s education, it’s awareness. So that’s something I think is going to be key. The other stuff I have worked through drugs that have had some nausea, the nausea transcend got to get the patients through the first couple of weeks again to Preston’s point you can’t hold her hand in a clinical trial you can help them through things in a marketed setting let them know what to expect, let them know if they get through the first of couple of weeks it’s going to go away thinks that all of that’s very manageable.

Cory Kasimov - JPMorgan

Okay. And then lastly for Mike, have Takeda given you any assurances of how Contrave would be positioned relative to [outwitting] if both are approved, and I asked that because of we have seen some messy situations in the past with Amylin and Lilly come to mind with the [GPT-4] (inaudible). Do you have assurances from them that it’s either equal billing or Contrave above.

Mike Narachi

Yeah I think that’s why based on experience Mark and the team drove these specific commitments from the Contrave because you do end up competing with somebody’s portfolio drug where they [aren't] 100% of the revenue or the profit. So one way to do that is to get specific spend and primary detail equivalent which you can measure and we will measure and audit effort put on it, but you can get around that if you say well, we are delivering the primaries but my field process is going to be get paid secondaries on other drug which is why we have specific position in the field force incentive compensation plan for Contrave outlined for those three years.

So those are, that's the contract, but I think really importantly with a partner like Takeda who is just top notch on two partners, spear of partnering, its about win-win and I think the Contrave in their mind is going to give tremendous lift to potential launch of Alogliptin.

Think about how compatible or complimentary of weight loss sale is with your typical diabetes patients and think about how that might differentiate your sales call and your product offering, there is even data that you can generate with the two which show even better hemoglobin A1c reduction with the combination etcetera. So I think there is a lot of complimentary there. So we are not worried, we are actually excited that the two would potentially come up together.

Jason Zhang - Edison Investment Research

Jason Zhang, Edison Investment Research. The question is first for Preston, is the difference between the normal patient population and the responder in terms of annual mostly? And if there is a difference would that change your calculation of the timeline for interim analysis?

Preston Klassen

No, that is really, I mean, if you look at the characteristics of our folks at responders and our side you can't really distinguish otherwise we would use kind of baseline characteristics to specifically target patients from more like the responders but we've been unable to do that so there's really no difference in terms of what you predict from a mainstay perspective.

Jason Zhang - Edison Investment Research

A question for Mike. I see you talked about the Takeda relationship. Is there any financial mechanism in the contract that will make sure they would deliver on what they, on your promise, pretty good in the first few years.

Mike Narachi

I'm sorry, any specifically…

Jason Zhang - Edison Investment Research

Any financial mechanism where you know they can deliver?

Mike Narachi

Yeah. I mean the only things that are specifically outlined are again the number of primary retail equivalents and dollars spent on the marketing spend, the outside expense and where Contrave fits in the incentive comp plan but there's not like a specific revenue targets etcetera. And then the other things are the royalty sharing which starts at 20 at certain sales levels and then gears up to 35 and then milestones. So those are the only specific things if I'm understanding your question correctly.

Jason Zhang - Edison Investment Research

Okay. And maybe another one for Mark, it was particularly interesting to see the really big difference between the current writer and as you know future writers in physician conjoint study where the current writer has a view on the three drugs [teratogenicity] but you know your writers have a huge preference for Contrave what product attribute you know that makes that difference? I guess if you know that you can really focus on that in your promotion.

Mark Booth

Yeah, I'm going to give you my opinion and my opinion is driven by some of the things that I showed in terms of what drives preference shares. I think overall they are very happy with the efficacy of Contrave and then some of the real key safety issues around teratogenicity and CNS especially cognitive.

Preston Klassen

In earlier research too we found there's a tremendous halo effect if you think about Phentermine market today is driving about its about 2 million patients on Phentermine right roughly. Bupropion is 7 million patients and the overlap on who is writing Bupropion and who is in that same filing that Mark showed for diabetes drugs is huge. So when you show them the profile and you have the two chemical names, Bupropion and Naltrexone almost all of them are already writers of Bupropion and they are very comfortable with it and they know that the patients are having a good experience so I think that helps. There's a halo of a known entity versus something unknown or something they don't write.

Unidentified Analyst

And I just had a question regarding your definition of the uncomplicated or non-complicated obese patients. It seems Contrave would do well in that particular population. I guess my question is for Mark in that, do you have any research that indicates whether these types of patients, this type of patient is less likely to be seeing a physician on a regular basis because he or she may not have any of the co-morbidities and if not what would be your plan to try to make that patient aware of your drugs?

Mark Booth

Right. So the answer is no. I don't have really any insight into that and uncomplicated obese is a term I basically made up. So it’s not a medical term. I want to make that clear.

Preston Klassen

We also don't want to offend anyone because we are all complicated right.

Mark Booth

Yeah. You know I think those patients are going to end up seeing physicians because it’s inevitable that if you are obese you are going to end up dealing with these downstream problems of hypertension, diabetes and dislypedemia so they are going to end up in the other category, sooner or later. It's just a matter of time. In terms of how do we get added? You know, I do think, direct to consumer activities are going to be really important in this market. I don’t see TV being the vehicle that go for a lot of reasons. That’s expensive. You know, a lot of fair balance with a two drug combination but I think there is a lot of other ways to get at and make patients aware that are much more cost effective and probably a lot more efficient through social media, print, those type of things and I am not speaking for Takeda but when we take a look at our entire marketing budget, there is definitely going to be a chunk there for consumer education.

Preston Klassen

And something else I will add to your question. The patients that enrolled in the Phase 3 clinical trial programs for Contrave and pretty much all of the Phase 3 programs that we've seen so far, kind of mirror the population at pharmacotherapy in the commercial setting and the majority of those are the “uncomplicated” obese. So those are people that are already getting that got sibutramine, Xenical, Phentermine. So I don't think there is a real issue with those people coming in and saying hey, look, I tried diet and exercise, not getting there. Is there anything else I can try? So I think they are already there. I mean everybody goes to the primary care physicians, that’s in the pharmacotherapy market, you know, once or twice a year. So you have an option there.

Unidentified Analyst

Still on the commercial angle? Do you have any idea what type of sensitivity a patient might have to out-of-pocket cost? Obviously, these drugs initially could be like expensive and at what price point would it be counter productive I guess to have a drug that’s promoted in the setting for now at least, which is going to be primary out of market payment?

Preston Klassen

You know, we've actually done a fair amount of work on that. I am not going to get in to exactly my pricing strategy and that type of thing but you know, you see where if you see a price stat and I think they came out at a reasonable price point.

Unidentified Analyst

Okay, and the last question I have is you have indicated in the past that you are not going to try to go for a label that does a drug would be particularly beneficial in their past therapies but you do have some data from your earlier trials that does show positive impact what portion of that data if any would be able to make on to your final label and what part of that would a salesperson be able to talk to?

Preston Klassen

You know it’s pretty unclear what might be allowed on the label the data we have today it is fairly small and it’s uncontrolled and so that’s certainly not the kind of data that would be highlighted necessarily from the labeling perspective. So I would have a high degree of skepticism around direct promotion, but I guess what I wanted to say is you would be talking and Mike already mentioned this in terms of behavioral effect everybody knows what the program is and so the reps are going to go in and talk about Contrave as a combination of Bupropion and Naltrexone and we know that two-thirds of the obese patient population is either frankly depressed or have depressive symptoms. And again, everybody knows what Bupropion is.

McDavid Stilwell

The construction workers next door that we would be done by noon, so the jack hammering quite may begin soon. I think we probably have time for one question last before lunch and then I hope everybody will join us for lunch and management will be around.

Unidentified Analyst

(Inaudible) thanks for taking my question. Given that you have stated that the single most important driver for reimbursement is market demand and that you have stated that you believed and I think all three companies believe that the market will grow 3X overtime or more. As we have seen the impediments to four more complete reimbursements with Qsymia over the last few months and likely to see some of that with Belviq, do you think that perhaps there might be some opportunity once you get on the market to see acceleration from that process and see an incremental benefit from that experience?

Mark Booth

I would say yes, I think the other two companies are breaking some very important ground, and if you take a look at kind of the chronological order of things here, I am not sure how much big we view managed care organization is, my guess is that (inaudible) has a largest infrastructure there and I know Takeda has a very large infrastructure there. So I think you are going to see more and more emphasis on reimbursement in calling down employers and dealing with managed care as the drugs come out in the order they are coming out.

Preston Klassen

Maybe help makes to people understand. In our partnering process in 2010 and now we often ask, we ask for capabilities presentation from companies and most companies are affective in primary care drugs have managed care teams in the US of a 100 to 150 staff, it’s a selling process, you are in the field, you got customers, employers and payers that you are working on every month, and cover this constantly improving and decreasing and you always fighting that, for right, trying to improve coverage in excess. So it’s a really important point that Mark makes to bringing that capability to better is going to be important and you think its inevitable, demand is necessary but not sufficient right, there are plenty of high demand products that are cash product, some of the lifestyle type drugs are cash products are not paid, other is life style products are covered.

So I think there's an important part here that as we build demand some portion of market will be cash or help along the adoption curve with sampling and couponing within that demand with public pressure to do something about obesity, anything I think it’s going to help.

McDavid Stilwell

And with that thank you so much. Lunch is down the hall and we hope you will join us. Thank you.

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