Orexigen Therapeutics, Inc. (OREX) has announced that the company received positive news from the Food and Drug Administration (FDA) regarding its New Drug Application for the anti-obesity drug Contrave. According to a company press release, the FDA has reviewed the latest application and has determined that Orexigen has met all of the criteria required in an action letter when Contrave was denied approval back in 2011. The FDA has established a goal date of June 10th to render a decision on the drug.
If Contrave is approved, Orexigen and partner Takeda anticipate a launch in the second half of 2014. Approval of Contrave would be the third new anti-obesity drug to garner that status since 2012. Arena Pharmaceuticals (ARNA) got approval for Belviq in 2012, and Vivus (VVUS) received approval shortly after. Vivus went on the market in the Fall of 2012, while Belviq launched in the Summer of 2013.
The resubmission for Contrave occurred in December of 2013 when the company outlined what it considered positive results in a cardiovascular trial. The results were such that the company felt it had met the guidelines of the FDA. The news today confirms that the study did indeed meet those requirements.
Orexigen has been an interesting play in the anti-obesity space. It is clearly behind in getting into the U.S. market, but may actually be ahead of its direct competitors in Europe. Qsymia, the Vivus anti-obesity drug, was rejected in Europe and failed on an appeal of that decision. Belviq, from Arena, had its application pulled in Europe prior to what would have been a rejection of that drug. The Belviq withdrawal was stated to be due to the fact that the company would not have enough time to answer the questions about the drug prior to the decision date. Vivus and Arena have both spoken of a resubmission in Europe, but as yet, neither has done so. That leaves Contrave as the only current applicant in that market.
One school of thought is that Contrave is not as effective as Qsymia, but not as safe as Belviq. Thus, in Europe it can be safe enough and effective enough to clear the hurdles there. Time will tell.
It is thought that 2014 will be a critical year in the anti-obesity space. There is a ripple of momentum regarding obesity and the other health risks that obesity brings on. Legislation regarding the subject is being proposed, and insurers seem to be slowly getting to a point where they are covering anti-obesity drugs. Currently about 40% of covered lives have some sort of anti-obesity drug coverage. Even without approval yet, the insurance issue is important to Orexigen and Contrave. The more insurers that cover anti-obesity drugs, the better off Contrave will be if it gains that approval and enters the market.
Orexigen is not without its challenges though. It is a combination of two existing drugs (like Qsymia), unlike Belviq which is novel. It would also be entering a market that has an entrenched Qsymia and Belviq. Educating doctors is a process, and while the other companies have blazed a trail, many doctors seem to wait a while to see some results and publications before making the move to script a drug.
For investors, there could be a nice play with Orexigen. As with almost any drug, an approval can send an equity up quickly. The biggest question is timing an entry point and being prepared with an exit point. The 6 month wait could be longer than many investors and active traders are looking for. In my opinion this is an equity worth watching. I have stated before that I like it better near $5 than at the current pricing of $5.67 or so. Whether it will test the lows that I consider attractive is yet to be seen. I do believe that an investor can afford to be patient if they are looking to invest in this equity.
Additional disclosure: I have no position in Orexigen or Vivus