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Orexigen Therapeutics, Inc (NASDAQ:OREX)

JPMorgan Healthcare Conference

January 14, 2014 2:30 PM ET

Executives

Michael Narachi - President and CEO

Analysts

Cory Kasimov - JPMorgan

Cory Kasimov - JPMorgan

Good morning everyone. My name is Cory Kasimov, Senior Biotech Analyst at JPMorgan and it’s my pleasure to introduce our next company which is Orexigen Therapeutics, good topic of obesity right before lunch. Presenting for Orexigen is President and CEO, Michael Narachi and following Mike’s presentation, there will be a breakout down the hall to the right in the Yorkshire Room, so with that turn it over to Mike.

Michael Narachi

Thanks and good morning. We got both on may be, you get it? Thanks. Thanks and good morning, it’s going to be a very exciting year for Orexigen 2014. We are excited about the potential for four really important catalysts that we have enumerated in the presentation today and what I want you to takeaway is how confident we are in U.S. approval and a differentiated launch from our strong partner Takeda in the United States, a European approval potential in this calendar year and progress if not an outright conclusion of robust rest of the world partnership that we can foster to commercialize Contrave in the other geographies outside of North America, where we have already concluded our partnership in 2010 with Takeda.

I will be making forward-looking statements and as usual there are lots of inherent risks in our business and we always advice investors to look carefully at the risk-related documents that we file with the SEC that could be found on our website or on the SEC website. Just looking at the global obesity epidemic that we know is large and growing, it’s pretty shocking when you look that it’s not just happening in large economically developed countries. Looking at this map and some of the features you can see the totality in 2000 was around 300 million people, but as you progress then to the present, it’s increased dramatically globally and the rates of acceleration in some of the more developing nations is even more dramatic and then the forecast doesn’t slowdown unfortunately where we have significantly more, hundreds of millions of patients around the world with obesity.

This alarming rate of growth and its association with diabetes and the costs for cardiovascular disease and diabetes puts obesity as a risk factor and a driver of cost in healthcare, morbidity around the world in virtually every nation now. This is crucial because not only does obesity drive diabetes but when you have the comorbid risk factors of obesity and diabetes, you can see a huge increase in the relative risk for cardiovascular morbidity and mortality and we know the costs for diabetes being around 245 billion in the U.S. and about 450 billion in the U.S. for cardiovascular disease. So, this is the chronic disease health cost drivers that are crushing our systems around the world.

And then therapeutically we have been able to intervene very effectively with drugs for dyslipidemia, diabetes and hypertension where globally we are spending about 100 billion in those categories and that’s the stage that’s set for the opportunity for obesity therapeutics to get ahead of these comorbidities that are driving downstream conditions and cost and try to build the category that could eventually move into the blockbuster status that we have seen these legacy categories become.

So, what’s it going to take? I think the key question that we get from investors is; well how you are going to get there, it hasn’t been done yet, it looks hard, it looks like it’s going to take time. It’s a market that needs to be built, how long should we wait. So, let me share with you some of the building blocks. I think it’s great that we have gotten recent U.S. approvals and I think it’s going to take global approvals. We are going to need to see not only U.S. but Europe and then cascading approvals around the globe. The crisis isn’t just here, it’s everywhere and we need all the health authorities to get behind that possibility of therapeutic intervention with obesity therapeutics.

Feels to us like what the world is waiting for and has been waiting for is not only efficacious drugs but drugs with a really clear safety profile because of the possibility that these products could be used in such a broad group of the general population.

And then it takes effort, primary care which a lot of pharma has decided is too expensive, takes a lot of effort, huge resourcing and multiple years of investment before there is return and that takes courage and commitment and that’s what it’s going to take in this situation as well. And not only size and scale but skill and knowing how to do this well.

And then access and coverage I think that’s going to largely follow demand, if we build demand, access and coverage will follow but there are lots of skilled approaches and targeted approaches to take to continue to build and there have been some great gains in the marketplace already just in the last year in the United States.

Continued investment and outcomes data, these other categories got built particularly in hypertension and dyslipidemia, because of massive long-term investments in cardiovascular outcomes data, solid outcomes, do you live longer, do you have less heart attack, do you have less stroke, do you go to the hospital less, do you save lots of money. So, these things need to be built into the system as well and that will take time, but we are on our way.

And then other lifecycle opportunities where you can continue to define specific situations or patient populations where you have specific tangible benefits, that translate to someone’s treatment decision.

So, let’s talk for a minute about the product for those of you who are less initiated to the overall opportunity here. You will see a shift from the use of Contrave, which is our proposed brand name to NB-32 that represents naltrexone and bupropion, because we have now entered a period of time that we could consider our disease state promotional campaign and not a branded campaign, so throughout the presentation and here forward, prior to approval, we’ll refer to Contrave as NB-32 which is the combination, a fixed-dose combination of naltrexone and bupropion.

Naltrexone being indicated for addiction and bupropion largely indicated for depression and smoking cessation. And a surprising unexpected positive result, when you put the two together you get far more in factorial design that’s shown on the right, than any additivity. So naltrexone demonstrates hardly any weight loss, about the same as placebo, bupropion unknown small amount of weight loss which is one of the reasons it was selected as very widely prescribed antidepressant particularly among the obese population. And then when you add the two together you get a far more than additive effect and that led to the founding of the IP and the Company.

Since that time the way we tally patents on the bottom which have been issued an expiry dates of 2024-25, the patents date has been broadened as is typical, many additional patents filed, some pending, and some issued, and the possibility to with the current filings extend the IP up to 2033.

To-date studies have included over 13,000 patients, 4,500 patients in Phase 3 programs elucidated the efficacy and the safety and tolerability profile overall and then data from the life study of about a 9,000 patient cardiovascular outcomes trial augments the totality of that safety profile, specifically with cardiovascular outcomes data in the heart attack, stroke and CV death but also in the total serious adverse event profile.

On efficacy, the focus I think for the whole category now based on the labeling decisions that have been made and the promotional efforts and predicted promotional efforts of others is on responders like most drugs, a portion of the population respond well and some portion of the population don’t. The effect size is actually pretty large here typically 50% or more of the patients exposed to the therapy have good responses. Some gain a little weight on the far left, some lose a lot of weight on the far right, but if you take it for the responders which is pretty easily evaluated after 12 weeks or so of therapy, you take the responders forward and you get appreciative amounts of weight loss.

Here from our Phase 3 trials you can see that amongst responders when you look at them 12 months out, big proportions of patients are losing 15% or 10% of their body weight translating to 40 pounds weight loss or 25 pounds weight loss, so this is a great response amongst that responder category again easy to find. Treat them for a short period of time and you know who your responders are.

When you add behavior change programs to the therapy, we’ve done this three times now, here are the results on the right hand pie chart show when you add a structured behavior change program, diet and exercise type of program you get dramatically different results. Look at how much the heavy or the large weight loss group grows, so the 15% or more weight loss group grows dramatically, so you get just a much better overall result when you combine the pill with a structured program. I think that’s a paradigm you’re going to see people approach the marketplace with, it makes sense. The core therapy is diet and exercise and then you augment that with therapeutic intervention on top of that.

Since this Phase 3 trial demonstrated this in our cardiovascular outcomes trial, where we added instead of this intensive face-to-face type program, we said how do you scale this to millions, so we developed a program with one of our partners Sharecare, one of Jeff Arnold’s new companies where we developed a Internet-based tool, where patients could log-on and not only does it help guide them through a weight loss journey but it creates a dialogue and a lot of really useful consumer-based information if you utilize that tool in the marketplace.

In a subsequent smaller method of used trial we did a similar thing with a telephone-based system, so we got face-to-face, Internet and telephone, and I think you’re going to see some exciting choices that commercializers of obesity therapeutics in use, some that were announced today where we start to build these kind of programs into the therapeutic intervention.

The safety profile was largely established in Phase 3, very consistent with the constituent drugs of bupropion and naltrexone and the life study then augments that. So just a minute on that study, we started that study in 2012, we enrolled it in about 6.5 months, 8,900 patients were randomized and I think about two years since we got the complete response letter from the FDA requiring this trial prior to approval we were able to unblind an interim analysis and used that information to resubmit our application to the FDA late last year.

Overall we’re not disclosing the quantitative results of the trial, but the trial met the hurdle for risk exclusion set prospectively by the FDA and there were no new safety signals that were observed in the trial inclusive of all the SAE information that we gathered.

And investors ask us, well what did you learn from the trial other than the point estimate for risk exclusion? Well there’s a huge amount of information from this trial and I’ll enumerate a little bit of it here, but the composite endpoint for the intent to treat analysis, the primary analysis is a composite of heart attack, stroke and CV death. So not only can we look at that but we can also look what happened on a per protocol basis versus the intent to treat, we can look for hazard early versus late, we can look at each component, what happened in heart attack, what happened in stroke, what happened in CV death. We also measured revasc and hospitalization for unstable angina.

And then there is a lot more SAE information in this trial than was in the Phase 3 database because the population is very different. Older and much more cardiovascular risks, so you would expect more serious adverse events that we can collect and then look down the columns of placebo in the treated group and see how it looks. So now this information gives us great confidence and the ability for a regulator to make a benefit risk assessment because it brings so much more unprecedented amount of safety information to bear prior to that decision.

Maybe to illustrate that for a moment, look at the demographics of who is in this trial. And I don’t have a side-by-side, but think about the demographics that were in most of the Phase 3 populations including the NB-32 population. Here we have an older population. Almost all of them had diabetes. Many of them had history of cardiovascular disease. And unlike some of those Phase 3 populations, about 25% of this group was obese with depression, or obese on SSRIs or smoking, much broader representation of racial demographics.

Gender split, the typical Phase 3 trials, the majority of them are women. Here we’ve got almost a 50-50 split of men and women. So if you had questions around important large subgroups that weren’t represented or generalizable from the Phase 3 dataset, we’ve got those questions answered.

So that data in our submission already in Europe that will supplement with this information and then the resubmission that we made in the U.S. gives us confidence, and the prospects for approval by our June PDUFA in the United States and by fourth quarter in Europe. So you could see the timeline here. The next catalyst for us is the Day 120 clock for the European submission, and I already mentioned the June 10 PDUFA.

So changing gears now to commercial success. What’s it going to take? We have got the building blocks that everyone would love to have when you enter a market, large, growing, huge unmet medical need, limited competition. This is not a saturated category by any means. It’s a category to be built. And then a good product profile that’s differentiated and then having the resources and the skills to make it happen, with so far in North America we’re delighted about our partnership with Takeda and we are in a robust partnering process for the rest of the world.

We’ve done a lot of market research, mostly to drive partnering dialogue and that market research shows us that Contrave is highly preferred in really large important patient segments, and we will tick through four of them. Women, the obese depressed, the obese patient with diabetes and patients that complain of food craving issues or food addiction issues. Each one of these, they are different and they overlap represent half or more of the total population. So more than half of the patients would tell you they are one of these people that are seeking treatment.

Here is the data on women from couple of years ago, IMS information, the yellow bars are women. It’s 50-50 in the population that women are seeking treatment today. I think this will change and it will change ultimately to where it’s closer to the actual gender split in the population, but today it is women. So you got to win the female patient. How does your product appeal to the female patient? This is where the majority of the market is on gender.

And when we ask that question for Contrave we can see a heavy selection for the Contrave profile amongst the female population. Amongst the male population with the three products that we tested here based on labels and a proposed label for Contrave, they’re about the same. But there is some selection for or selection away from other products based on attributes for the female population.

Some of this is driven, I think, by the comfort and the high pattern of use of Wellbutrin already or bupropion in females with depression and obesity. The graph on the lower right shows you the use of antidepressants in the obese population. The one in the far left is Wellbutrin or bupropion. But another interesting point to note and this is why it is important that we have all these patients in a life study. About two-thirds of the population is either obese with depression or signs and symptoms of depression. This is a really important overlap in that comorbidity in the obese population.

And so when we ask physicians, if you were given the opportunity to prescribe Contrave, how do you think about it in obese patients with depression that are not on an antidepressant? And about 90% of them say, I have a high willingness to prescribe. And then when you ask them that question if they are already on an antidepressant; about 70% say they have a high willingness to prescribe. This is without promotion, education or showing them life study data or any safety information.

I want to focus now, mostly on the diabetes population then on the rest of the world opportunities. Huge portion of the obese population has either diabetes or pre-diabetes and the numbers of these patients, 26 million in 79 million Americans is just astounding. And where it’s headed is even scarier. We’ve done some recent market research, quantitative market research, again robust 500 physicians, OB/GYNs, Primary Care and importantly a large group that represent current physicians who don’t write, which is the majority of the prescribing population. So they are not writing for obesity drugs today.

What are you going to do? Again 60% of all the obese populations have one of these two conditions, pre-diabetes or diabetes. And when you ask them what are you going to do amongst those patients, and they say, I’m going to write a lot more, I get it. I’m already preferentially choosing drugs in diabetes that have good weight management profiles over other drugs that may have better A1C changing properties.

So, they’re going to write a lot more in the coming years when you ask them about their willingness to prescribe NB-32, they say they’re very welling and then how much of your patients will you adopt it in these are higher numbers. And if I accelerate here to adoption curves, the blue bars are adoption profiles that we’ve looked at in the past in the general population, the yellow is amongst the pre-diabetes or diabetes population.

So, they’re predicating, they are telling us they’re going to adopt these kind of therapeutics or NB-32 specifically among these two big groups, faster, easier to believe a higher activation energy or call it action in those patient populations. So, we think that the diabetes target is a rich one and it’s a great fit for our partner Takeda who already has skill, experience and a presence in that market amongst the primary care of physicians in the United States.

There are lifecycle opportunities that can support this. First, a diabetes indication, once you have outcomes data with a small Phase 3 trail, you can get an indication for NB-32 for the treatment of diabetes with a secondary benefit of weight loss and a flip side of an indication for the treatment of obesity with a secondary benefit of A1C lowering affects.

You could also apply this and to fix those combinations which we’ve already done the formulation work and it’s ready for human bioequivalent studies, where you could put a DP4 alongside Contrave which would be a fixed-dose combination that could be indicated for patients with both obesity and diabetes and that’s a really short clinical development pathway.

Shifting now to the partnership that we have with Takeda, we’ve talked about this a lot before, so I won’t go into the terms of the deal but I will say that the contract and their agreement with our partner is a likeminded approach, this is going to take a multiyear commitment typical primary care type launch, we’ve got to invest heavily and put your foot on the gas and then drive a trajectory that then in the out years, you’ll see the results and get the return on that investment and that’s the kind of structured deal that we have. Takeda has everything in place commercially to drive this, they’ve got skill, the experience and the commitment and we couldn’t be happier with our partnership in North America.

The targeting I think I talked about already, but with Takeda already there, we haven’t – they haven’t disclosed where they’re going to target but they’ve got the resources already in the field to deliver market leading promotional efforts in this marketplace and I think that’s going to be a welcome addition of resources as we build this market.

Access and coverage are increasing, it has been great progress already even with limited demand an we’re pleased with all that progress and that’s going to be great for us to be able to launch into it and help build. And now in the remaining few minutes I want to talk about rest of the world.

So, a lot of focus amongst you as biotech investors is on the opportunity in America and I want to show you here that in ’07 which is the last year that there were several branded drugs in the market, the rest of the world opportunity was far larger. I don’t think this would be the exact split, I think it would be probably two-thirds rest of the world, one-third America but we have forgotten about two-thirds of the market and I’m highly confident now in our European approval but then cascading global approvals and then the confidence we have that we’d be able to partner the opportunity here to commercialize globally and the returns back Orexigen share owners for the rest of the world opportunity I think are factored in so far and valuation at about zero.

So this is a huge upside opportunity that we expect to be able to deliver in this calendar year. And people talk when they talk rest of the world about Europe, it’s not just Europe. Look at the growth in obesity in these regions, look at Brazil and look how much sales was generated in just Brazil. Over $100 million in sales and in small markets with 20 million people like Australia with $50 million in sales historically of obesity drugs, these are important markets and they are growth engines for big pharma and people know this that are in the partnering dialog and they are really interested in the opportunity to bring this therapeutic commercially around the world.

Our financial position in closing is very strong, we released unaudited financials that we ended last year with about 177 million in cash and if things go according to plan, we should actually end this calendar year with more, we’ve got milestones coming in that we expect from the launch in North America from Takeda, potential new milestones from the rest of the world deal and the possibility of beginning their own royalty income.

So in conclusion, really a transformational year for us and with the data it gives us a tailwind and confidence in both the U.S. and the European approval process, it gives us confidence that we can get a great partner for the rest of the world to match the great partnership we already have in North America and we’re really excited about the launch in this calendar year from Takeda in the United States. Thanks for your time and attention.

Question-and-Answer Session

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