Orexigen Seeks Approval In Europe For Anti-Obesity Pill

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 |  About: Orexigen Therapeutics, Inc. (OREX), Includes: ARNA, VVUS
by: Spencer Osborne

Orexigen Therapeutics (NASDAQ:OREX) announced today that the company has formally submitted its anti-obesity drug, Contrave, for approval in Europe. The move was not unexpected, but the submission of the application does point to the company executing its plans.

Contrave is the third player in the market, but does not have approvals anywhere as yet. Competitor Arena Pharmaceuticals (NASDAQ:ARNA) and Vivus (NASDAQ:VVUS) both have FDA approvals in the United States and are marketing their respective drugs there. Vivus has had its drug rejected in Europe and is seeking to try submit for approvals there again. Arena withdrew its application in lieu of getting an outright rejection when it became apparent that the application would be rejected for various questions and concerns.

The events with Arena and Vivus in Europe set up Orexigen to be the possible front-runner there, even while not yet having U.S. approval. The strategy was a shift from the path of seeking approval in the U.S. first that we saw with Arena and Vivus. If Orexigen can have success with its European application, it could give the company a better chance of overall success. Of course, getting approval is no easy task.

The prescription anti-obesity space has certainly been interesting. The potential market is substantial. Obesity is a huge problem throughout the world, and is connected directly to many other heath conditions that plague mankind.

From an investment standpoint the prescription anti-obesity space has seen its own challenges. With such a promising potential market it is easy to think that solutions will see immediate success. This has not been the case. Vivus' sales of Qsymia have been modest in its first year, and sales of Arena's Belviq, while pacing better than Qsymia at a similar stage, are not hitting expectations either. The hurdles are consumer acceptance and awareness, the willingness of doctors to prescribe, and a lack of compelling insurance coverage.

Still, even with these hurdles, the space is seeing activity. Along with Orexigen, Arena, and Vivus, there are others that are showing interest. Novo Nordisk (NOVO) is seeking to get the diabetes medicine Victoza approved for weight loss, and privately held Zafgen is conducting trials on the drug Beloranib. If you are invested in any of these companies, the fact that there is interest in this sector by other companies should be viewed as a positive. It demonstrates that the potential in this space can be real.

From an Orexigen investment standpoint, the news of an application in Europe will provide a short term pop in the equity. However, this is just the beginning, and investors will need patience as the months pass by awaiting a decision. The risk side is that Orexigen is late to the anti-obesity space in the United States, and ultimate approval in Europe is unknown. If Orexigen can garner approval in Europe and be the sole player there for a period of time, it would help the company catch up to Arena and Vivus. There is potential, but there are still a lot of "if's" in this story. Stay Tuned.

Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have no position in Orexigen, Vivus, or Novo