Cramer Likes Orexigen: Should You?

Cramer made a call Thursday night that the FDA will approve Orexigen's (OREX) weight-loss drug Contrave.

Cramer's basic summary of the case for obesity drugs is fine, and I agree that Contrave's chances for approval are excellent.

But for ages I have been arguing that there is little point in putting all your money on one late-stage weight-loss drug when there are three good candidates to choose from, all due to submit NDAs for FDA approval within about six months of one another: OREX's Contrave, Arena Pharmaceuticals' (ARNA) lorcaserin and Vivus, Inc.'s (VVUS) Qnexa.

Incidentally, why Cramer or anyone else would think that Contrave is getting to an NDA before anyone else, rather than last as the three companies are all saying, is a mystery. Believe this guy who says he just heard of the company on Tuesday, or believe me who's been paying attention to it for a couple of years. (However, Cramer is lots richer and more famous than me, so you could argue he must be doing something right.)

Approval risk is highly unpredictable and not to be underestimated, particularly in the case of small pharma companies whose fortunes often rise and fall on the fate of a single drug. Even when approval is simply delayed, that gives competitors more time to get to market.

I think Contrave is a great drug. I've always liked Orexigen management, and I fully expect to see OREX submit an NDA for Contrave in the first half of 2010 and receive approval ten months or so (the FDA is, indeed, missing a lot of its target dates) later.

But why take my word for it, or Cramer's for that matter? FDA is not likely to ask our opinions. A better risk-adjusted strategy is to put together a basket of late-stage weight-loss drugs: OREX's Contrave, Arena Pharmaceuticals' (ARNA) lorcaserin and Vivus, Inc.'s (VVUS) Qnexa.

Disclosures: None

Comments

[PhillyDan]

Cramer or a member of his staff did a poor job of research on Orex. Particularly regarding when they will file their NDA. All the indications from Orexigen is that the NDA will be filed sometime in the first quarter of 2010.

Arena will file their NDA for Lorcaserin in December.
Vivus will file their NDA for Qnexa in December or early 1st quarter 2010.

He also brushed over the potential safety issues/side effects that did show up in the Phase III study results for Contrave.

Today, JPM Securities initiated coverage for both Vivus and Arena.

The analyst for JPM - Mr. Duncan wrote his analysis for Arena and expressed his concerns for the safety of Lorcaserin. Poor analysis or poor reading skills on his part. The Bloom Phase III study results showed clearly no safety or tolerability issues with Lorcaserin. There were no "Valvulopathy" issues and in fact they were less than placebo. Each patient in the study started with a baseline Echo Cardiogram and received one every three months during the 24 month study. I would recommend he go back and look at the data once again with his reading glasses on!

Arena is set to announce their Blossom Phase III study results before the end of September and Vivus will announce their Phase III study results for their Equip and Conquer studies before the end of September but should announce those results prior to Arena.

The Vivus message board on Yahoo, is getting very antsy about "where are the results". Some posters believe they have the results already which is not the case. They are still going through the "unblinding" process. Patience is a virtue.

2009 Aug 18 05:54 PM

[Ruthanne Williams Roussel]

PhillyDan, I agree that ARNA has come as close as reasonably possible to showing that lorcaserin has a more precise mechanism of action than previous weight-loss drugs and so is not associated with valvulopathy. What remains to be seen (assuming approval) is whether this will be a marketing issue or not in the minds of docs and/or patients, but that has to do with perception, not reality.

2009 Aug 18 08:04 PM

[gloriafool]

Please do not listen to Cramer... 2 days... and I repeat 2 days before the news on provenge came out for DNDN he said sell sell sell.... trust me I know because I sold sold sold at 6 and change... ouch ... that one hurt.... and if you do no believe me... go back to yahoo news 2 days before the data came out... this is one sorry person :(

On Aug 18 08:04 PM Ruthanne Williams Roussel wrote:

> PhillyDan, I agree that ARNA has come as close as reasonably possible
> to showing that lorcaserin has a more precise mechanism of action
> than previous weight-loss drugs and so is not associated with valvulopathy.
> What remains to be seen (assuming approval) is whether this will
> be a marketing issue or not in the minds of docs and/or patients,
> but that has to do with perception, not reality.

2009 Aug 20 06:24 PM

[gloriafool]

Please do not listen to Cramer... 2 days... and I repeat 2 days before the news on provenge came out for DNDN he said sell sell sell.... trust me I know because I sold sold sold at 6 and change... ouch ... that one hurt.... and if you do no believe me... go back to yahoo news 2 days before the data came out... this is one sorry person :(

2009 Aug 20 06:24 PM