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Orexigen (NASDAQ:OREX) announced Tuesday that the company has received what it calls positive feedback from Europe's EMA regarding the anti-obesity pill Contrave. The obesity pill is under application in both the United States as well as Europe.

Orexigen is the third player in the United States and playing a bit of catch-up with Vivus (NASDAQ:VVUS) and Arena (NASDAQ:ARNA) which already have drugs approved stateside and are currently marketing them. The down side of being third to the market is that brand awareness is growing for competitors while Contrave remains in the FDA's hands. The up side to being third to the market is that Orexigen can benefit from the leg-work performed by pharmaceutical reps with doctors as well as insurance companies.

One interesting component about Contrave is that it is currently perceived as having a lead in Europe. Vivus's Qsymia suffered a rejection across the pond, and competitor Arena pulled its application in lieu of getting a rejection because the company stated it would not have enough time to answer questions raised by the EMA. Vivus has now designed cardiovascular studies that it feels may help it in Europe, while Arena has sold rights in Europe to partner Eisai, which expressed that it may seek approval for Belviq in Europe in 2015. The bottom line is that Orexigen may be able to be the first to market in Europe if it can pass muster on the first attempt.

Approval in Europe is not a shoe-in by any means. With regard to obesity medications, the challenge has been the risk vs. reward of these types of pills. For its part, Orexigen feels that the list of questions it received from the EMA point to the possibility of a positive result. In contrast though, Vivus and Arena also felt positive about their respective 120 day questions received from the EMA.

"The 120 day questions reflect a thorough initial review of the NB32 MMA (Contrave) and did not raise an surprising concerns. We believe data from the Light Study clearly addresses cardiovascular safety concerns, and we are confident we will be able to respond to the remaining questions in a timely manner. We remain highly confident that NB32 (Contrave) will receive a positive opinion from the CHMP at the conclusion of its review" - Michael Narachi, CEO

Investors should understand that perhaps some confidence is warranted. Orexigen did have the benefit of seeing the trial and error phases of the process from Vivus and Arena. However, some caution may be warranted as well. Contrave is oft perceived to be more effective yet less safe than Belviq and safer yet less effective than Qsymia. If one were to believe that Belviq failed because it was not effective enough, and Qsymia failed because of safety concerns, Contrave may be in the sweet spot to garner approval. In contrast, if even Qsymia's effectiveness was not enough, then Contrave may have a much more difficult time than some may think.

In addition to this news regarding Europe, Contrave is about 4 months away from a possible decision in the United States. In my opinion the United States has a much greater chance of success than Europe, but if Orexigen can be first in Europe, it will bolster the company nicely in that it will be the only new anti-obesity drug with approval there.

Lastly, sales of anti-obesity drugs have not delivered a wow factor to the street. For a sector with so much potential, the initial results in sales have been underwhelming. Vivus reported about $25 million in U.S. sales for 2013. Arena launched Belviq in June, and its sales are anticipated to be even lighter than that. Insurance coverage will be a big driver as these drugs move forward. For now, it is a wait and see stock with potential news from governing bodies in the next 4 to 6 months.

Source: Orexigen Sees Positives In European Application For Contrave

Additional disclosure: I have no position in Vivus or Orexigen.