Seeking Alpha
Growth, value, special situations, momentum
Profile| Send Message|
( followers)  

Orexigen Therapeutics (NASDAQ:OREX) announced Monday that the company has seen positive interim results on its Light Study regarding cardiovascular impacts from the anti-obesity drug Contrave. Based on these results the company intends to, in the next few weeks, resubmit Contrave for FDA approval. This makes potential approval of Contrave in the United States fall into a timeline of 6 to 7 months from now. If approved, Contrave will join Vivus' (NASDAQ:VVUS) Qsymia and Arena Pharmaceuticals (NASDAQ:ARNA) Belviq in the marketplace in the United States. Qsymia and Belviq received FDA approval in the summer of 2012. Orexigen was rejected by the FDA in 2011 because of a lack of data relating to cardiovascular issues. The Light Study is being conducted to assess that issue. The FDA had outlined certain criteria for resubmission and the interim data would suggest that Contrave met the criteria set forth.

Contrave is already under application in Europe. Vivus saw its drug Qsymia rejected in Europe and Arena withdrew its application for Belviq when it became apparent that approval would not happen. Both Vivus and Arena have stated that they will seek approval in Europe at a future date. The news sent Orexigen shares up sharply in early action.

Bringing a third entrant into the prescription anti-obesity space presents an interesting dynamic for investors. Common thinking is that Contrave is more effective than Arena's Belviq, but not quite as effective as the Vivus drug Qsymia. Contrasting that is that Belviq appears to have the best safety profile with Contrave coming in second and Qsymia in third. Of the three drugs, Belviq is new and novel, while Qsymia and Contrave are combinations of existing drugs. One benefit that Contrave has over both Belviq and Qsymia is that it will not be a DEA scheduled drug. This could make the pathway to physician acceptance easier.

The biggest player in the prescription anti-obesity space is phentermine, which sells between 120,000 and 150,000 scripts weekly. Currently Qsymia is selling between 10,000 and 11,000 per week, while Belviq is pacing at about 5,000 to 6,000. Both Vivus and Arena still need to see sales increase substantially to get to the types of profits investors are anticipating, something that Orexigen investors need to keep in mind. The prescription anti-obesity space has not been an easy space to crack.

If you are invested in, or looking to invest in Orexigen, I recommend monitoring the progress of Vivus and Arena. These companies are blazing the trail in many ways. Insurance coverage is paramount to overall success, and to date about 40% of covered lives have some sort of prescription anti-obesity benefit. In theory, any progress made on the insurance front will benefit Orexigen should Contrave garner approval. Of the two competitors, Vivus and Arena, investors will want to watch Arena more closely in my opinion. Arena is partnered with Eisai (OTCPK:ESALY), while Vivus is thus far bringing its drug to market on its own. Orexigen has a big pharma partner in Takeda, which will certainly be watching and monitoring what Eisai is doing to market Belviq.

In my opinion sales in the prescription anti-obesity space will be challenging for the remainder of 2013. With the holidays ahead, getting new patients will be challenging. Let's face it, there are fewer shopping days this year than in years past, and setting up a doctors appointment may not be a high priority. Thus, the real story in the anti-obesity space will formulate in 2014. If insurance formularies increase coverage to 50% or 60% of covered lives, it could be a great boost to any drug in the space, thereby increasing equity value of both approved and pending approval drugs.

The Orexigen news Monday was great, but there are many months ahead before potential approval. This very well could be a sell the news situation followed by a holding pattern pending overall anti-obesity space news in early 2014. Stay Tuned!

Source: Orexigen Sees Positive Interim Results On Drug Study

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