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Executives

Michael Narachi – President and Chief Executive Officer

Jay Hagan – Chief Business Officer

Analysts

Stephanie S. Wissink – Piper Jaffray & Company

Orexigen Therapeutics, Inc. (OREX) Piper Jaffray 2013 Healthcare Conference Call December 3, 2013 11:00 AM ET

Stephanie S. Wissink – Piper Jaffray & Company

Good morning everyone. My name is Steph Wissink, I’m the Co-Director of Research at Piper Jaffray and because of the Company’s announced filings today, our Senior Research Analyst Charles Duncan is unable to host this fireside chat. So I’m going to be doing it, standing in, on his behalf. It’s a pleasure to have the team from Orexigen here with us today.

Mike the CEO is going to be sitting beside me, we’ll have a mic to pass it on the room. So if you have questions please raise your hand and we’ll get that mic to you, the company is webcasting the event today and the rest of the team is here with Mike this morning. So just to begin Mike maybe give us a quick overview of the company for those that are not familiar and maybe some of the highlights?

Michael Narachi

Sure, Orexigen is chiefly focused on our primary asset Contrave which has gone through about 4500 patients for the Phase III development was submitted to the FDA number of years ago, went through the full review and we received the CRL that outlined a single approval deficiency and that was the need to exclude excess cardiovascular risk, that CRL was ambiguous and we saw then to clarify, what does excess mean, how much risk do we need to exclude and through a formal dispute resolution process, we were able to obtain exclusive clarity on exactly how much risk we needed to exclude, in order for the drug to be approvable that was received in the form of a letter, in response to the appeal from the office of new drugs or senior levels at the FDA.

And we subsequently kind of validated that response all the way to the Head of SEDAR, we then got a spot agreement on the specifics of the protocol and financed essentially $150 million cardiovascular outcomes trial, that we executed in record time to my knowledge 6.5 month enrollment of over 10,000 people randomized about 8900 people and that was in the second half of last year.

Last week, we announced the results of the interim analysis of that trial, which had to meet a pre-specified hurdle, and there were two key gauging items that were outlined by FDA, one we have to exclude about the same amount of risk is in the diabetes paradigm where they need to exclude cardiovascular risk pre-approval and then more post approval.

So that was a doubling of risk or exclude the upper bound of 2.0 on the confidence interval to 95% confidence interval and then also just validate there are no new safety signals, so we looked at large quantity of data last week-end, and then announced that we had successfully met those two hurdles. And so that’s where we are now, what I think this data enables for the company is high confidence from the management team tracking towards four key things for next year.

A U.S. approval which should come around June PDUFA, we anticipate so potential approval in that timeframe, a potential EU approval, our application is under review currently and as we expect in response to Day 120 question, supply information from this large cardiovascular outcomes dataset to satisfy their questions about safety and we’re confident in a favorable risk benefit from those two jurisdictions, we’re confident that a rest of world partnership can be obtained in a high quality share owner value creating way, so we’ll make progress on that for sure in the coming months and the next year.

And there is going to be a powerful launch from Takeda shortly after U.S. approval, Takeda has rights to Contrave in North America, in the terms of the agreement with Takeda give us confidence that there are contractual obligated minimums in terms of promotional effort dollar spend et cetera are going to be appropriate for a primary care drug launch, so that’s a nutshell setting up for what I think is going to be a really exciting 2014.

Stephanie S. Wissink – Piper Jaffray & Company

Talk a little bit about the total addressable market and how you see your segmentation strategy within that?

Michael Narachi

The global market is enormous over 100 million patients that are potentially eligible for on label therapy, just in the U.S. currently there is only about 2% of them treated with obesity therapeutics in the U.S. so to grow the market objective here and will be for a number of years, to create a category for obesity therapeutics that’s similar to other cardiometabolic primary care therapeutics, dyslipidemia, hypertension, diabetes meds et cetera.

It’s going to take long-time and multiple drug and a lot of education promotion awareness treatment guidelines, payer awareness, employer awareness et cetera, that’s changing faster than I would have expected in the last couple of years, lots of things have been happening and we’re seeing coverage being built from estimates of around 20% to 40% and growing already.

So that’s kind of a backdrop now, where does this product fit in, the profile for Contrave based on market research that we’ve tested, appears to appeal to many natural segments in the market that are dominant.

Today this is largely a female driven market about 70% plus of the current Rxs and historic Rxs have been amongst females versus male. So genders split for obesity is 50-50. But people seeking therapy, predominantly are women I think that will change over time women drive healthcare decisions in most households in America and once women are adopting the therapy and seeing success I think they’ll urge it on to their male counterparts, sons, husbands, fathers, et cetera.

So Contrave’s profile appears to be highly attractive to the female segment of the market in the physician’s point of view and I think that’s partially because of the historic comfort they have with one of the constituents’ Buproprion where it’s written often in females with co-morbid depression and obesity and predominantly in women. The majority of the Wellbutrin or Bupropion scrips are in females.

And I think also some worries about the labeling of the other drugs on the market today with the labeling that they have with regard to pregnancy risk. The diabetic or diabetes population I think is a natural for obesity Rxs in general. But with our partner Takeda and their strength in the diabetes market I think it makes sense. The diabetes market today physicians are writing drugs to manage glucose parameters but also preferentially selecting drugs that have good weight management profiles.

So they already know that weight management is a cornerstone of care for the patients with diabetes and an effective commercialization partner can go in and offer a solution for weight management, a new solution for weight management to add on top of that therapy that help them lose weight I think that’s going to go a long way and then the next obvious patient is the pre-diabetes patient.

And two large randomized controlled trials have shown that if you manage weight or it can show a small reduction in weight you dramatically change the progression to Type II Diabetes. So I think that those patient profiles right there are great, being alone.

Stephanie S. Wissink – Piper Jaffray & Company

So this maybe visually provides for us a backdrop of the competitive landscape in that market, where you feel like you have some advantage?

Michael Narachi

Well again, I think it’s almost a dream as far as a market to enter because the unmet need is enormous, the timing I think is right, the awareness that we need to do something about the public health crisis in the epidemic is enormous. There is limited competition, more entrants are actually good, I think if people could come into this market with large promotional resources it would help to grow the market and change the awareness pattern which is coming but it would accelerate. All of the drugs in the market all have different mechanisms of action and they all appeal to certain natural segments of the market.

So, competitively we’re kind of cheering for each other really at least that’s our view that if they do a good job, we’ll all earn a natural preference share and then that will translate to market share based on prevalence in the market of the segments that appeal to you or you talk about 70%, of the market where Contrave will appeal and then the market share is also dictated by are you asking for the business. So if you have a much, much larger sales force you’ll be going places where people aren’t, that’s not the ideal scenario I think it’d be better as people add resources that there is more growth in the market than just a fight over a small share.

Stephanie S. Wissink – Piper Jaffray & Company

Talk a little bit about your marketing partner discussions today?

Michael Narachi

Well as I said, we’ve got a terrific partner in North America, and that’s in Takeda and the rest of the world process has been underway. But since we already fully funded with investor support, the Light Study, the data from that we wanted to wait, we could have done executed either geographic deals or rest of the world deal prior to this moment in time but now with that data, it really gives strength to the process, so we can run it in a more competitive and structured way.

The opportunity outside of the U.S. is large it’s probably over the next decade, I would say that the sales would be larger outside of the U.S. than in the U.S. it is not a European only market, this is a classic primary care case, where there is a lot of growth in the emerging seven markets and interest historically obesity Rxs are used higher on a per capita basis and other markets like Brazil, South Korea, so I think there are lot of opportunities and a lot of interest and, I won’t comment on the timing of that but we’re confident we will be able to secure very capable partner for the rest of the world.

Stephanie S. Wissink – Piper Jaffray & Company

I think you mentioned the EU approval process was underway, so where are you at the end of timeline there and how does that coincidence with the partnership discussions?

Michael Narachi

I think it’s important and many geographies prefer a European approval to as a start for the filing process, many will take a U.S. approval, the absence of one of those could be the questions amongst regulators, especially if there was a denial. So I think it will be important that someone have confidence at least if it progresses, we submitted in October in Europe and expect so that’s at the Day 120 set of questions in late February for us. And so if you use usual timelines for any new classes that would put a CHMP opinion in the second half for the potential approval in late second half 2014.

Stephanie S. Wissink – Piper Jaffray & Company

Questions in the room?

Question-and-Answer Session

Unidentified Analyst

[Question Inaudible]

Stephanie S. Wissink – Piper Jaffray & Company

Just repeat the question in Mike for this webcast.

Michael Narachi

Yeah, the question was with the recent cardiovascular outcomes trial data, do we see any opportunities for commercialization other than just de-risking regulatory processes and the short answer is yes, ultimately when the final results are in the public domain that’s definitely true.

In these interim data needed to be carefully held confident, so not to bias the integrity ongoing trial, the final results are going to be incredibly important and that’s what everyone signed up for. When patients sign up for clinical trial, part of it’s for their own self interest and part of it’s for the altruistic goal of getting an answer to an important question and that answer the really robust answer is that the final analysis, the interim analysis is based on about 25% of the expected total information of the trial.

So we’re going to preserve the integrity of the trial, however I think people will gain confidence knowing that an additional 8900 patients with the safety and cardiovascular outcomes data was evaluated by capable regulators to come to their risk benefit assessment, there won’t I don’t expect any specific information in package inserts or publications until the trial is completed.

Stephanie S. Wissink – Piper Jaffray & Company

Other questions in there.

Unidentified Analyst

[Question Inaudible]

Michael Narachi

Yeah, the question for the broadcast is do we see Empatic necessarily being linked to any Contrave deal, the short answer is no, however we’ve publicly stated we wouldn’t fund the full development program for Empatic on our own, we would want to do that in concert with our partner not only to fund the Phase III program for regulatory approval but to expand the base of and the timeframe for intellectual property, so that would take additional investments.

And so it could be linked, and I think that would be potentially an optimum way of the deal terms were right to position the two drugs in a complementary fashion because they will appeal to different segments of the market the combination of Empatic is for those who you aren’t familiar with that is the same dose of Bupropion 360 milligrams of sustained-release Bupropion plus an anti-convulsant zonisamide which the weight loss profile in Phase IIb trial was greater than Contrave, but it comes with the rest of the profile that the anti-convulsant class typically has which is some risk of birth defect and cognition deficit and other things are in the safety profile remains to be seen how that plays out, when you combine it with Bupropion how much of the pharmacology is offsetting, but one good piece of news, from the Light study data is that it derisks cardiovascular risks for Empatic as well because the cardiovascular risk, the theoretical risk the FDA was concerned about was attributed to Bupropion.

So I think that’s a nice thing. So we’ll find out how the – when the rest of the world partnership process is being run it’s a great opportunity to see what the interest is and the interest level and the terms on Empatic.

Stephanie S. Wissink – Piper Jaffray & Company

Other questions in the room?

Unidentified Analyst

So maybe just one follow up to that, the development plans any change in how you’re thinking about those strategies around those plans with the acknowledgment of Empatic how you’re thinking about that?

Michael Narachi

Nothing other than just confidence that from clearing the risk exclusion hurdle that, we’ve also cleared the hurdle per se for Bupropion in general which has never been tested perspectively in a large randomized cardiovascular outcomes trial, so that gives us comfort there and then on development in general there are lot of life cycle opportunities for Contrave.

And many of these drugs and your confidence then to go and invest is dependent on confidence in regulatory and confidence in commercial. And so you know though Takeda our partner Takeda and Orexigen have long discussions and plans for life cycle management, we are not going to go into the details there.

But you could expect as we progress, some of those things coming forward as well. We have an ongoing trial, it’s called the Ignite Study that was designed as a real world method of used trial where we combined Contrave with another form of behavior modification there was a telephone base or is a telephone base commercially available behavior change tool for weight management. And so our view has always been if you take the therapy plus the program put them together you get a much better result than either alone.

We prove that in a randomized trial in Phase III where we put everyone in the trial on active behavior change therapy, there was robust and then have got placebo, and have got Contrave in the group that got Contrave plus that therapy did far better in proportionate and in total weight loss than the group that only had sort of best available behavior change, we since done than an internet based weight loss program in the Light study and than in this Ignite study it’s a telephone base weight loss program.

So we are exploring what are the best ways of consumers going to have a choice or a best in class type of behavior change program that will be up to Takeda to decide exactly how to implement that commercially but that’s been our view.

Stephanie S. Wissink – Piper Jaffray & Company

As per the resources they’ve put against the program as well that listed with this development?

Michael Narachi

We haven’t disclosed anything in particular on the resources but pre-approval Orexigen is responsible for 100% of the development costs and then post approval the costs are shared roughly on a 75%:25% basis, 25 Orexigen, there is some specifics around that in the timing and how those cash flows work but it’s essentially the arrangement.

Stephanie S. Wissink – Piper Jaffray & Company

Any other questions in the room?

Unidentified Analyst

[Question Inaudible]

Michael Narachi

Yeah, I mean in some cases the opportunity for bias is much greater, so for example if you’re still enrolling there will be a greater chance of bias could you might get different kinds of people if you announced the trend line that may or may not be true, but if you announce that anything – any information, in our case, I think it’s whether or not people stay in the trial.

You can imagine the announcement of a result that made everybody say well obviously get the commercial product and drop out of the trial or cross ends people that are in placebo, they don’t know, they’re on placebo but they might go, get commercial drug or even if they dropped out of active treatment and they go and get commercial drug decided not to get commercial drug.

So there is lots of things that could happen to change the ongoing observation remember a lot of people are going to be off therapy by the time the final results read out because that’s just the natural course of any product mix especially in obesity therapeutics and we want as much as possible to keep the two groups pure one that would expose the randomized to Contrave and one that was randomized to placebo.

Unidentified Analyst

[Question Inaudible]

Michael Narachi

They can, but you could change the dynamic half way through the trial.

Unidentified Analyst

[Question Inaudible]

Michael Narachi

I definitely expect the PDUFA to come first, the trial was set up with pre-planned interim roughly at 25%, 50%, 75% and 100% of the information that was planned when we started the study. The first interim analysis was a special one where the DMC Charter has usual stop the trial for harm, stop the trial for known benefits, so if you hit clear benefit or clear harm at any point the ethics of the charter would say we should stop the trial.

The regulatory hurdles were set for the interim for approval was that the upper bound of 2.0 and for the final was it is 1.4%, so the subsequent interims will run to normal, stop if you’re on either end of a broad spectrum and then there is the opportunity to test to see, if you hit the final analysis at any one of those of course you would look at those interims, the sponsor was only going to get the data from the first interim, if we hit the risk exclusion hurdle.

And on the subsequent interims, we wouldn’t get the data unless we hit one of those stopping points like, we’ve already excluded the risk if we exclude the risk that’s in the final hurdle the 1.4% at an early time point for example, you could also have the opportunity to test for superiority. So if you improve benefit then there wouldn’t been a need to proceed to the final analysis or to continue the trial.

But those things will be looked at only by the data monitoring committee and Orexigen won’t get that data unless you’ve hit the goal.

Unidentified Analyst

[Question Inaudible]

Michael Narachi

And the total trial expense was estimated at about $150 million and it’s front-end loaded, we’ve by the time the PDUFA we will have spent somewhere in the vicinity of $100 million total on the trial and most of that was on the front-end study start up costs enrollment et cetera. I don’t know Jay if you want to add to that the question was what’s the 2014, expected expense on the trial maybe it’s more useful to talk in general terms about overall expense but…

Unidentified Analyst

[Question Inaudible]

Jay Hagan

For a significant number of visits for the first 26 weeks after which we go to every six month visit. So we were out in that 30 state period of time now so I would suggest you look at what our Q4 R&D expense or Light Study is that the proxy for how it’s in the study state going forward.

Stephanie S. Wissink – Piper Jaffray & Company

Any other questions in the room, I hope with that I think we’ll wrap up. Thank you very much Mike and team.

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Source: Orexigen Therapeutics' CEO presents at Piper Jaffray 2013 Healthcare Conference (Transcript)
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