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Or, Why I Am Not A Day Trader

Tuesday morning, April 13, Orexigen Therapeutics (OREX) filed an 8-K with the SEC restating downward some of its previously released clinical trial data for its flagship weight loss drug Contrave and including an updated slide show.

OREX filed a New Drug Application (NDA) for Contrave two weeks ago on March 31. The stock price had slumped 11% as I wrote this. The opportunity to buy is better now than it was last week when I bought more OREX. My timing is dismal.

This announcement may produce short-term volatility, but I do not expect that it should affect OREX’s long-term prospects for partnership or approval. Although the data have been revised downward, they are still above FDA efficacy guidelines.

The data affected were in the continuation trial after week 28 originally called NB-303, then renamed COR-II. The percentages as originally reported incorrectly re-weighted the patients re-randomized to Contrave32, without accounting for the patients that had already been re-randomized to Contrave48.

The error was of a magnitude of roughly 10%-14% (not percentage points) for the modified intent-to-treat, last observation carried forward (ITT-LOCF) group, the stricter version used by the FDA. This goes up to 14% - 18% for the completers, the group OREX has preferred to emphasize.

NB-303 / COR-II Comparison Lost 5% of body weight at week 56 Lost 10% of body weight at week 56
Revised Originally Revised Originally
ITT-LOCF 50.5% 56.3% 28.3% 32.9%
Completers 64.9% 75.8% 39.4% 48.2%

This is not quite as low-level as the “clerical error” claimed Tuesday morning by a Jeffries analyst. That would be an arithmetic blooper, or a misplaced decimal point. It’s more of a “junior-grade” error, and I’m surprised that it wasn’t caught earlier.

OREX is up to around 60 employees now, from 30-ish two years ago, but most of the adds we have heard of are in marketing and commercialization.

Slide Show Suggests Partnership Discussions May Lag

The slide show, although billed as an “Investor Presentation,” appears geared more toward potential partners, which is slightly worrying at this late stage of the game – I had hoped that discussions might be a bit farther along. Five slides of the 60-odd total intermittently repeat a graphic that shows four blocks representing Contrave, Empatic, “Proven Team for Commercialization,” and “Deal Structure” all pointing inwards to an oval called “Orexigen Partnerability.” (One of these slides is infelicitously titled “Orexigen: An Attractive Partner For Three Key Reasons.”)

Contrave Sticks To Marketing Plan

The slide show (PowerPoint deck, if you will) includes a handy one-page summary of OREX’s previously mentioned market research:

  • Ÿ The launch of new agents should expand the obesity pharmaceuticals market 3 to 4 times within a few years
  • Ÿ The entry of branded products will dramatically increase the dollar size of the market (currently mostly generics such as phentermine)
  • Ÿ Efficacy and safety will be key to win over prescribers, both current and potential

Ÿ OREX plans to target differentiated segments with Contrave if approved, such as women, patients with difficulty controlling food cravings and patients with depressive symptoms.

I particularly like this last bullet point. The interaction between depression and obesity is complex and worthy of attention. Being heavy makes supporting one’s mental health more challenging in many ways – it puts pressure on personal relationships, reduces confidence, and limits physical and creative activity. Even if you stop doing the wrong things and start doing the right ones, the weight doesn’t come off right away, making it hard to reinforce good behavior.

The nutshell buy case: while a pill isn’t likely to be the magic answer all by itself, it could help jump-start weight loss when diet and exercise alone have not grabbed hold.

Disclosure: Long OREX

Source: Orexigen Revises Contrave Trial Data Downward