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Orexigen Therapeutics, Inc. (NASDAQ:OREX)

Q4 2007 Earnings Call

March 13, 2008 5:00 pm ET

Executives

Gary D. Tollefson, M.D., Ph.D. - President, Chief Executive Officer & Director

Graham K. Cooper - Chief Financial Officer, Treasurer & Secretary

Anthony A. McKinney - Chief Operating Officer

Heather D. Turner - Vice President & General Counsel

Analysts

Thomas McGahren - Merrill Lynch

Corey Davis –Natixis Bleichroeder

Cory Kasimov – JPMorgan

Adam Cutler – Canaccord Adams

Matthew Osborne – Lazard Capital Markets

Charles Duncan - JMP Securities

Ruthanne Roussel – The Robins Group

Operator

Welcome to the Orexigen Therapeutics’ fourth quarter and full year 2007 financial results conference call. As a reminder all participants will be in listen only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. (Operator Instructions) The conference is being recorded. On the call today are Dr. Gary Tollefson, Orexigen’s President and Chief Executive Officer; Graham Cooper, the company’s Chief Financial Officer; Anthony McKinney, the company’s Chief Operating Officer; and Heather Turner, the company’s General Counsel. At this time I would like to turn the conference over to Dr. Tollefson.

Gary D. Tollefson

Good afternoon. Appreciate your joining us for the fourth quarter earnings call. This afternoon we issued a press release that provides details of the company’s financial results for the fourth quarter and the year ended December 31st, 2007. The press release is available on our website at www.Orexigen.com. We will review these results in a moment but before we begin with that I’d like to ask Heather Turner, our General Counsel, to cover the Safe Harbor Statement.

Heather D. Turner

Please note that all of the information discussed on the call today is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. I caution listeners that during this call management will be making forward-looking statements. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company’s business. These forward-looking statements are qualified in their entirety by the cautionary statements contained in today’s press release and our SEC filings including the annual report on Form 10K that we expect to file shortly. The contents of this conference call contain time sensitive information that is accurate only as of the date of this live broadcast, March 13, 2008. Orexigen undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.

Gary D. Tollefson

As most of you are aware, Orexigen was founded to address disorders of the central nervous system and our initial focus has been on the development of unique proprietary drug combinations for the treatment of obesity. Our clinical development strategy has been to design drug combinations to both initiate weight loss and then importantly limit the effect of compensatory pathways in the brain that counter extended weight loss. This approach differentiates from other competitive programs especially those that employ only a single active ingredient. We believe that as a result of our approach we have a potential to more effectively address the growing epidemic of obesity by providing patients with the potential for a sustained clinically relevant degree of weight reduction and an improvement in secondary health consequences.

During today’s call we’ll cover the key financial results for the fourth quarter and the year ended December 31st, 2007 followed by a significant recent progress that we have made in advancing our two key obesity programs and our two pipeline programs. After that we’ll open the call to answer your questions.

Now I’ll turn the call over to Graham Cooper, our CFO to take us through the financial discussion.

Graham K. Cooper

During the course of our discussion I will be referring to the press release that we issued and the attached statement of operations and balance sheet prepared in accordance with GAAP. I will be rounding numbers for the purpose of this call, please refer to these documents for precise figures. As of December 31st, 2007 we held $29 million in cash and equivalents and an additional $56.5 million in investment securities available for sale, which together total $85.5 million. As you know we raised an additional $75 million in net proceeds in a public offering of common stock in January leaving us with a pro forma cash balance of approximately $161 million. We also have additional borrowings available under our debt agreement which extends until the end of the 2008. I would like to specifically point out that Orexigen has no auction rate securities on its balance sheet as of December 31, 2007 or currently. This is an issue that has come up for a number of biotech companies recently but is not an issue for us. Our investment policy does not permit the purchase of these types of securities and we will continue to avoid them.

For the three months ended December 31, 2007 we reported a net loss of $19.4 million or $0.72 per share attributable to common stockholders as compared to a net loss of $23.3 million or $10.28 per share for the same period in 2006. Total operating expenses for the fourth quarter of 2007 were $20.3 million compared to $9.7 million for the fourth quarter of 06. The increase in operating expenses in the fourth quarter of 07 was primarily due to a $9.4 million increase in research and development expenses in connection with continued enrollment of our AS3 contract clinical trials, formulations development and related consulting activities. In addition G&A expenses increased by $1.1 million principally due to increases in salary and other personnel costs, stock-based compensation expense and professional fees. For the year ended December 31st, 2007 we reported a net loss of $57.8 million or $3.08 per share attributable to common stockholders compared to $41.4 million or $18.87 per share attributable to common stockholders for the comparable prior year period. I’m also pleased to report that our net loss for the year compares favorably to our budgeted net loss. We spent about $10 million less in 2007 than we had expected to partly as a result of efficiencies that we have achieved in clinical development.

On the Q3 earnings call we indicated to you that we were planning to raise additional capital in early 2008 and I just discussed we completed a follow-on equity offering in January that generated approximately $75 million in net proceeds to the company. The purpose of this financing was to provide enough cash to see us through contrary [inaudible]. We now have over two years of cash on hand which positions us not only to achieve this milestone but to push our other programs forward according to planned timelines.

With that I will turn it back over to Gary.

Gary D. Tollefson

I’d like to continue our discussion with a review of the significant milestones that we achieved in the fourth quarter of 2007. One of the key highlights of the quarter was our presence at NAASO, the Obesity Society’s Annual Scientific Meeting which was held in New Orleans in October. We had a very successful series of presentations at that meeting. First we presented a full retrospective review of the contrary program including an elaboration of several of the key secondary endpoints in the Phase IIb and B-201 study. Patients treated with Contrave showed a preferential reduction in visceral fat and a marked improvement in measures of insulin resistance and other factors including triglyceride, HDL, LDL and blood sugar. Together such increments hold potential for the significant long term health benefit of our patients.

We also presented the results of a pre-clinical study that added to our understanding of the mechanism of action of Contrave. We previously had demonstrated that Contrave directly increases and sustains firing of hypothalamus POMC neurons which is associated with the reduction in food intake and increased expenditure of energy. However in the present experiment Contrave was directly injected into the reward pathways of the brain of diet induced obese mice which resulted in a 94% reduction of food intake which was significantly greater than that seen with either drug administered alone. These results demonstrated that Contrave also acts in parts of the brain associated with food reward pathways. These modulate craving and where reward and reinforcement are located.

We also presented the 24 week data on the Empatic Phase IIb study that we refer to as ZB-201. This was a large 620 patient trial which for the first time incorporated our proprietary sustained release formulation of zonisamide. As we reported at the conference all of the dosage groups demonstrated statistically significant efficacy over placebo at a P less than 0.01 level. In addition the trajectory of weight loss for all of the dosage groups continued downward at 24 weeks. Let me remind you that there was only a minimal diet and exercise intervention in this trial resulting in average weight loss amongst placebo patients of slightly over 1% in both the ITT and completer groups. Perhaps more impressively the discontinuation rate due to adverse events on the highest 360 dosage group was 16.9% which was not statistically significantly different from that seen with the placebo group. Likewise the pooled AE related discontinuation rate for the active dosage arms did not differentiate significantly from that seen with placebo. As a postscript we reported a few weeks ago the 48 week results of the ZB-201 study. Patients who remained in the double blind therapy beyond 24 weeks achieved between 10 and 14% weight loss on a ITT basis and 12 to 15% across the six dosage arms for completers. Discontinuations due to adverse events were highly infrequent during the second half of this trial. For example no patients on the high dose 363/60 dropped out between weeks 24 and 48 due to an adverse event and only one or two patients in each of the other dosage arms discontinued due to an adverse event. We feel that the safety and tolerability results represent a strong validation of our SR formulation and its impact on improving patient compliance with this drug combination. We plan to take the highest Empatic dose 363/60 and one other into further development which I will address in a moment.

We also held a very successful Analyst Day in December where we updated investors on our recent clinical progress for Contrave and Empatic and shared the details of two of our key pipeline initiatives. Let me briefly touch on these pipeline programs. OREX-003 is the internal designation that we have given to the [elanzipean] zonisamide combination. This candidate is for the mitigation of antipsychotic-induced weight gain. The typical antipsychotics have proven to be effective at treating both schizophrenia and bipolar disorder and the market for these drugs has expanded dramatically over the last 10 years. Zyprexa alone sold approximately $4.5 billion at its peak in 2004. However a number of these drugs, Zyprexa in particular, have been associated with weight gain and possibly metabolic consequences. Misperception has caused prescription buying in the US to suffer. We have conducted pre-clinical work led by our Chief Scientific Officer, Michael Cowley, in with zonisamide attenuated elanzipean associated increases in appetite, body weight and blood glucose at both central and peripheral sites. Based on these results we plan to initiate Phase II Proof of Concept Trial for OREX-003 early in the third quarter. We anticipate that this trial will enroll approximately 75 subjects across multiple size with results available towards the latter part of 2009.

OREX-004 is the internal designation we have given to fluoxetine/naltrexone combination. This candidate is for the treatment of obsessive compulsive disorder or OCD. OCD is often treated with an SSRI such as fluoxetine. Unfortunately many patients do not respond to SSRIs and those who do respond often achieve only a partial improvement in symptoms. In particular compulsive symptoms of this condition tend to be less well controlled by SSRI therapy. We believe that the addition of naltrexone to an SSRI may improve outcomes for some sufferers of OCD. We have conducted a pre-clinical study examining the effects of the combination of naltrexone and fluoxetine in a well established animal model of OCD. In this study we showed a statistically significant reduction in compulsive behaviors with this combination when compared to either drug alone, naltrexone or fluoxetine following seven days of treatment. We plan to initiate a Phase II Proof of Concept Trial for OREX-004 in the early third quarter and anticipate to enroll approximately 90 subjects across multiple size with results available in late 2009.

Now I’d like to touch on the recent progress the company has made in advancing our obesity programs. With regard to Contrave we have now initiated all four of our Phase III trials. We initiated our NB-301 and NB-303 studies in the fourth quarter. In the NB-301 study patients are being blindly randomized to one of two doses of Contrave, 16 milligrams naltrexone sustained release or 32 milligrams naltrexone sustained release plus 360 milligrams of bupropion sustained release or a placebo. The co-primary endpoints for this study are the percent change in body weight and the percent of patients who achieve a 5% or greater weight loss in each case measured 56 weeks after the start of treatment. The trial is designed to take place at approximately 40 centers nationwide and we plan to enroll approximately 1,650 patients. Our NB-303 study is designed to study the effects of Contrave in generally healthy obese patients with a provision for dose escalation in non-responders. Patients are being blindly randomized initially to either NB-32 or placebo. After 28 weeks of therapy Contrave patients who have not achieved at least a 5% weight loss will be blindly re-randomized to receive either a higher dose of Contrave, this is the 48 milligram naltrexone SR or remain on the original dose. We intend to analyze as co-primary endpoints for this trial again percent change in body weight and the percent of patients who achieve a 5% or greater weight loss each case measured 56 weeks after the start of therapy. The trial is designed to take place at approximately 37 centers nationwide and we plan to enroll approximately 1,500 patients.

Also I would like to speak to recent announcements regarding a Notice of Allowance from the United States Patent and Trademark Office for patent applications for the sustained release compositions of bupropion and naltrexone combined in a single dosage form. This patent which we refer to as the Weber/Cowley Composition patent would extend patent protection for Contrave in the United States by 11 years until 2024. We also received notification the European Patent Office has issued a decision to grant the patent covering compositions and uses of bupropion and naltrexone for effecting weight loss. This patent once issued would extend the protection for Contrave in Europe also until 2024.

The overall message on Contrave is the program remains on track for an NDA filing in late 2009. We expect that we will begin to see data from our Phase III clinical trial in late 2008 or early 2009 and continue to see data coming in in the first half of 2009 as the recently initiated Phase III trials complete. With a growing intellectual property estates protected we are extremely optimistic for the prospects of this lead program.

With regard to Empatic as you know we plan to conduct one additional Phase IIb study of Empatic in order to establish its superiority of the combination over the individual therapies. We plan to take the highest 360/360 milligram dose along with one other into that trial. We expect to initiate that study this summer. Assuming that the study runs for 24 weeks we would expect to complete the trial later in the first half of 2009 and be in a position to initiate Phase III trial in the second half of 2009.

In 2007 we made the successful transition from a private venture back company to a growing public entity. We have to date received strong support from the investment community for the company and our lead product candidates Contrave and Empatic. We appreciate that support and we thank you for joining us on the call today. That concludes our formal comments. Graham, Tony, Heather and I are now ready to answer your questions. I’ll turn it back to our Moderator.

Question-And-Answer Session

Operator

(Operator Instructions) The first question is from Mr. Tom McGahren of Merrill Lynch. Please go ahead, Mr. McGahren.

Thomas McGahren - Merrill Lynch

Graham and everyone there, will we see any presentations between now and the end of the year and could you tell us what they’ll be?

Gary D. Tollefson

Yes, we indeed will be planning to have a series of presentations. We have submitted, we’re waiting to hear back which ones are accepted at which meetings. But to give you a general sense, we’re king of targeting the ADA again, also NAASO for a significant presence and then also the ACNP or American College of Neuropsychopharmacology and I think those will be our three major targets that we anticipate presenting and what we hope to do is be able to talk about some of the additional work that we’ve been doing in the metabolic front with Contrave, looking at some of the additional secondary analyses from the ZB-201 trial and then also just trying to overview and create a greater understanding from the viewpoint of the integrative science we have from really looking at the bench to the bedside, we’ve put together a couple of programs we’ve submitted, truly take our early work, our early pre-clinical work and show how we’ve bridged that across from animals to human studies, proof of concept to our large multi-center trials to begin to create a more comprehensive story about the science behind the Orexigen programs and how we got from point A to point B.

Thomas McGahren - Merrill Lynch

And then just one additional question, you mentioned that there’s still a chance that we could see Contrave Phase III data from the 302 trials in late 2008. You think that’s really possible or should we really be thinking about early 09?

Gary D. Tollefson

Well it depends if you meant will I see it or will you see it. I am reasonably confident I will see it sometime in December but as you know we want to make sure that the data when it comes in has been appropriately QAs and that all of the analyses indeed are ones that we feel comfortable with articulating. So if there happened to be a healthcare conference early in January that might be a forum where we would be most likely to provide this information, maybe in the first or second week of January hypothetically. But, Tom, let me just re-emphasize too though as we’ve announced that trial as completed its enrollment so the 56 week clock is ticking on the last patient so as far as the study completing per what we have said, yeah there’s every reason it should complete at that time point or even perhaps a week or two sooner.

Operator

The next question is come from Mr. Corey Davis of Natixis. Mr. Davis, please go ahead.

Corey Davis –Natixis Bleichroeder

I guess probably for Gary, is it unusual for combination drugs to not test the individual components for statistical separation in Phase III trials or are you unique with the FDA agreeing that you’ve adequately proven that in your Phase IIs for Contrave and hopefully will do so with the upcoming trial for Empatic?

Gary D. Tollefson

Yeah, the latter. Based on our discussions with the FDA and our understanding of the guidelines for combination product development, the FDA is interested ideally in the sponsor demonstrating the superiority of a combination product to its individual constituents in placebo as part of Phase II. Ideally they would like to see that demonstrated as a gating event to move into Phase III and in their minds once that has been accomplished, which according to the FDA it has for Orexigen, then subsequent comparisons would be against placebo versus the combination, no need to further replicate or validate against the individual components. Now if one had not sufficiently demonstrated that to convince the FDA, it’s certainly conceivable they could ask for additional work as part of a Phase III package for a sponsor to provide them. But in our case, we have had more than one or two dialogs and we have written confirmation as we’ve said before from the FDA that we had sufficiently demonstrated the superiority of Contrave to naltrexone alone, bupropion alone and placebo such that we do not need to do any of those replications in Phase III.

Corey Davis –Natixis Bleichroeder

Then that’s not unique to you guys?

Gary D. Tollefson

It’s not unique to us, but I think the onus is on demonstrating it convincingly early in your course of development and if you do do that there is no need to continue to show that in Phase III.

Corey Davis –Natixis Bleichroeder

And obviously the Contrave trials are all still blinded but can you say anything qualitatively about what the overall dropout rate has been as an indication of whether or not your new formulation of naltrexone has indeed reduced the rate of unacceptable nausea?

Gary D. Tollefson

We’re just kind of huddling here with non-verbal’s. I think we haven’t said anything about that to date so I can’t really make any substantive comment on it.

Corey Davis –Natixis Bleichroeder

Were you nodding?

Gary D. Tollefson

I don’t think we’ve seen anything divergent from what we anticipated.

Corey Davis –Natixis Bleichroeder

Fair enough and then the last question, plans for both Contrave and Empatic in Europe, eventually when you sign a partner would you prefer a worldwide partner or thinking about maybe splitting it up by geographic regions and then as a component of that, the trials hat you’re conducting at least with Contrave now sufficient for EMEA approval?

Gary D. Tollefson

Sure, well one a day is the key gating events for us to even begin to think about OUS development for Contrave of course was getting the notice that belongs to the European patents and so now we’re in a much stronger position to have a dialog whether it’s regional or global. Right now I think ultimately, I don’t want to lock us into one scenario or the other, keeping the shareholder in mind, whatever turns out to be the most attractive deal would probably be the pathway we would go. Now that said, as we’ve talked about with you and your distinguished colleagues in the past we see the program for Contrave maybe ideally as a co-promote in the US with regional development outside the US, regional partners. Whereas with Empatic I guess I could argue it could go either way but certainly a global partner at the stage of development that Empatic is in would make sense if it’s otherwise an attractive deal. I guess we could argue whether it’s a strength or a weakness but I ‘d like to think of it as a strength, we have retained as much flexibility as is possible here to try to maximize value of the asset to bridge them to the shareholders’ benefit to get the most attractive deal we can and, again, as you know that could be through regions or it could be won global, it depends on how the add ups look.

Operator

The next question is from Mr. Cory Kasimov of JP Morgan. Mr. Kasimov, please go ahead.

Cory Kasimov – JPMorgan

Start off with a big picture question here and I was wondering if the recent FDA diabetes draft guidance has had any impact at all on your development strategy for either Contrave or for Contrave and/or Empatic regarding the somewhat favorable language for obesity compounds?

Gary D. Tollefson

It’s a good observation. We certainly have been attuned to it and have taken a look at it and for those who haven’t seen it, I think the point you’re trying to emphasize is that in the past the FDA was pretty adamant on this concept of pseudo-specificity that being that if a drug causes weight loss I expect that patients’ blood sugars might improve and so you can’t seek a second claim as a treatment for diabetes and so it was pretty much a non-starter. They have clearly indicated in those guidelines that they have revisited the concept and are now willing to entertain the possibility that a drug that principally has been studied as a weight loss agent or that that’s its mechanism of action clinically could also receive approval as a therapeutic for diabetes. So they certainly have created a possibility and a pathway for that. One of the things I guess as I look through it that I think we still need to think through and we have to have dialog with them, is they still are very interested in the demonstration by the sponsor that that weight loss drug also improves glycemic control in lean individuals. So you would have to have a mechanism that improves glycemic control that is not completely dependent on weight loss and it may suggest that there’s an opportunity though to your question for us to do some additional proof of concept work. I would like to wait and see what our NB-304 trial results look like in Type II diabetics. But if there are some encouraging signals, for example, people with lower BMIs or people that lost less weight nonetheless show an A1C improvement, those could all be positive indicators to say that we should look at potentially a second indication in diabetes. So let me just wrap it up by saying I’d like to wait and see the 304 trial results, take a look at that data. But you’re absolutely right that the FDA guidelines do create an opportunity that didn’t previously exist for us to look at a Contrave or an Empatic for Type II diabetes indication.

Cory Kasimov – JPMorgan

Regarding the partnership opportunities that are out there, and I’m not going to go rehash the strategy that you’ve talked about, each individual one, but one question I have is have you given any thought or discussion about partnering the two products as part of a package deal or are any companies approaching you with that sort of intention?

Gary D. Tollefson

We certainly have thought about. Again, I don’t want to sound like the proverbial broken record but the best deal will be the one that we look at and the best deal could be a package, it could be a case where one plus one is three and doing them separately actually has more value. Interestingly in preliminary conversations with several players you get different views. Some people see it as a definite advantage to have two shots on goal or even to have two products in the salesperson’s bag to talk about in obesity properly positioned. Others might say, gee I don’t want two because I only need one and the other one represents an opportunity cost that we could be doing something in oncology or an earth science and so it really ties back a little bit to the portfolio prioritization, corporate strategy of the company as to whether or not they want the two or the one. So we’ve heard both and I think again it’ll boil down to the strength of a deal.

Cory Kasimov – JPMorgan

And as we sit here today then the strategy is kind of the same, Empatic ideally you’d partner pre-Phase III and Contrave post-Phase III?

Gary D. Tollefson

Yeah, I mean I think as Graham has indicated in the past when we have Phase III data in hand we think that the will be a very substantial inflection point for the valuation of the company and specifically Contrave. So we’re not tremendously incented to want to have a deal in place prior to having the Phase III data because I think it might leave some money on the table. With Empatic, because we’re approaching Phase III next year, if we were going to have something in place it might make sense to have it in place second half of this year, beginning of 09. But we don’t want to make a premature commitment on Contrave in advance of the Phase III data.

Cory Kasimov – JPMorgan

And then lastly, could you update us on the status of enrollment for 301, 303, 304?

Gary D. Tollefson

I’d like to, but again it’s something we haven’t disclosed so the only thing I hearken back to you is we have not changed the NDA submission date. So I guess you can infer that there hasn’t been any new kind of rate limiting event that’s occurred.

Operator

The next question is from Adam Cutler of Canaccord Adams. Mr. Cutler, please go ahead.

Adam Cutler – Canaccord Adams

Most of my questions have already been answered but just one other question on the partnership front is that even though it sounds pretty clear that your intention is to wait until you get the Phase III Contrave data before you consider signing any partnership deals for that product, given the progress that you’ve announced on the patent front, has that heated up the interest from prospective partners recently?

Gary D. Tollefson

There are two ways I’d approach answering that for you. One is that there is no doubt that the additional Weber/Cowley Notice of Allowance adds substantially to the net present value of the asset and extending composition matter protection out to 2024 is clearly very attractive compared to the Dante 2013 expiration that we had anticipated so if you look at that and then you look at the parallel action on the European theater as a validation of the strength of our IP and its concept of achieving a composition of matter patent for these two components the validation that the European actions provide, those two things in concert clearly are incentors I think for people to have a higher level of enthusiasm than they had say before January 1 this year.

Operator

(Operator Instructions) The next question is from Matt Osborne of Lazard. Mr. Osborne, please go ahead.

Matthew Osborne – Lazard Capital Markets

Just wondered, on 003 have you looked at, plan to look at or can you comment on sedation with 003?

Gary D. Tollefson

Matt, you said sedation?

Matthew Osborne – Lazard Capital Markets

I did. Sedation.

Gary D. Tollefson

You know, of course the study hasn’t started yet but that will be something that we will look at from the viewpoint of the safety data. We actually built in specifically, Matt, some scales to assess both quality of nighttime sleep and daytime somnolence in the ZB study. That will be part of what we plan to present for example at meetings this year. Let it suffice to say that in the obese subjects receiving zonisamide in combination with bupropion that did not appear to be a significant concern but I take your point and clearly with elanzipean zonisamide we’ll continue to look at that and make sure that that is not going to be a safety issue.

Matthew Osborne – Lazard Capital Markets

And then, Graham, quick question on R&D and SG&A expense, given the pretty clear evidence of how you plan to enroll trials this year, can you give us a sense of the operating expense items for this year or too early to provide some kind of guidance or would you provide that guidance at all?

Graham K. Cooper

We haven’t provided guidance specifically between R&D and SG&A. What we have told people is that they should expect that our cash burn will be somewhere in the neighborhood of $75 to $80 million.

Operator

The next question is from Charles Duncan of JMP Securities. Mr. Duncan, please go ahead.

Charles Duncan - JMP Securities

I had a couple of questions on the earlier stage pipeline regarding 003 and 004, if you could give me a little bit more color on the timelines for those two programs. They seem a little bit extended and I’m just trying to get a handle on whether or not you think enrollment will be governed by some factor or if it’s really trial design.

Gary D. Tollefson

Basically it’s the liability of sort of moving it from June to July. I think in the past when we’ve talked we thought we would possibly be able to get those up in the second quarter. We had always thought it would probably be in June. We really spent a lot of time to make sure that we get ZB-202 right and that we get it started first and because of putting our priority resources on the ZB-202 I made conscious effort to go ahead and let the 003 and 004 slip back by 30 days. So what we’re anticipating is that we’ll have those going in July as opposed to June. Not a lot of slippage and partly a prioritization internally because we want to make sure that all elements of ZB-202 are wrapped up and they are.

Charles Duncan - JMP Securities

And then, Gary, with regard to the IP strategy on the earlier stage pipeline, is it going to be similar as that with Contrave and Empatic whereby you’re looking for synergies to drive your patenting claims?

Gary D. Tollefson

Well certainly in the case of fluoxetine naltrexone the pre-clinical data we presented last year at the ACMP meetings did show a very striking synergy and so that is the basis for the composition filing of fluoxetine naltrexone. In the case of the OZ project, there it’s not so much that we’re looking at synergy for efficacy, rather some of the mechanisms that Michael’s lab has uncovered as to how and why zonisamide mitigates a typical antipsychotic-induced weight gain represents the novelty of those observations and so our play there more with the OZ is from a safety viewpoint and that is, as you know, the mitigation of weight gain associated with the atypical agents and there again the mechanism of action is what is particularly novel.

Charles Duncan - JMP Securities

That’s really why I was asking, so do you think that OZ represents an opportunity for a composition of matter patent or will that be more of a use patent?

Gary D. Tollefson

I think that certainly the latter possibly the former, but also keep in mind that as we indicated we have a Notice of Allowance for zonisamide as a monotherapy for weight loss or weight prevention and so having zonisamide alone we think having that patent protects us or provides us the opportunity but then also using zonisamide in tandem with elanzipean. You follow me?

Charles Duncan - JMP Securities

Yeah.

Gary D. Tollefson

Some people may have sort of brushed over our press release on the Notice of Allowance with zonisamide monotherapy but it does provide us some very strong support for the OZ program as well as other ways we might want to use zonisamide when it comes to, for example, drug associated weight gains and other classes of drugs.

Charles Duncan - JMP Securities

And then it’s clear you’ve been very busy with these programs but any thoughts on possible additional new INDs late this year?

Gary D. Tollefson

I wouldn’t want to speculate on it, we certainly have our antenna up for potential end licensing opportunities. As you know, everyone’s looking but if we could find something consistent with our business strategy and something at the right stage of development where it wouldn’t have any [dilgerious] effects on our focus and obesity and the earlier pipeline projects, of course we would do that. But haven’t really tied us down to say we’ve got to have something this year. If the right opportunity presents itself, yes, but I think with the four projects on our plate for this year, I feel pretty comfortable with what we’ve got. If something does develop on the earlier stage as you mentioned, maybe a candidate compound that’s IND ready we certainly I think have the ability to absorb and act on it but no commitments or promises on that front.

Operator

The next question is from Ruthanne Roussel of The Robins Group. Miss Russell, please go ahead.

Ruthanne Roussel – The Robins Group

Have you seen any anecdotal evidence, I know it’s early days yet, but have you seen any signs that this may be already starting to build Contrave’s brand? Are you getting an up tick of clicks on the website maybe, or calls, people looking for it?

Gary D. Tollefson

I think in general what we have found is that there is a tremendous amount of consumer interest and innovative product opportunities for the treatment of obesity and so when we have been fortunate to be a company where one of our products has been featured in a media related event, typically it does generate an increase in interest on the part of consumers and so as you’ve laid out that kind of scenario has been one that we have seen and it just reminds us of the strong interest on the part of the public for new therapies for obesity and the role of the consumer in this whole process. So, yeah, absolutely these kinds of things are only positive I think for us particularly when it’s from a reputable source and a well written publication. Yeah, that’s a plus for us.

Ruthanne Roussel – The Robins Group

And kind of on the same theme of Contrave, it’s launch and its brand, is it going to make any difference if [Seranavant] does not show up? It’s looking like it may not.

Gary D. Tollefson

No, I don’t think so. We tend to think that we have sort of the best of both worlds in that if we are the next obesity product out there that is obviously a significant plus for us. On the other token if someone else is out there in advance of us, this is such a large market, there is such a great opportunity to educate consumers about novel therapies for obesity that the market clearly could absorb three or four or five products much like the depression market did in the early 90’s and how it grew. So we certainly I think would be comfortable with either opportunity. I think the most important thing is that the next product that gets through the FDA review and were to be approved and commercialized be a product that has clear, undisputed safety.

Ruthanne Roussel – The Robins Group

And last of all I’d just like to beat the dead horse of the FDA diabetes guidelines being changed a little bit longer, would it be fair to say that of the many things that your candidate drugs do that the sort of secondary indications that you’re looking at there’s really been more of a focus on psychiatric uses than on the diabetes or is that a stretch?

Gary D. Tollefson

No, I think we often talk more about some of the behavioral aspects and benefits that we would expect in the potential for Contrave to mitigate because we have to I think create an awareness about that aspect of obesity. That said I think in our clinical trials programs and what we might anticipate in future product labeling we put an equal weighting on both the psychological and the metabolic front. So, for example, and many people in the audience remember this, we had a major presentation at ADA last year about the ability of Contrave to reduce visceral fat and then specifically with this reduction of visceral fat around bodily organs as you would expect the improvement in insulin sensitivity, improvement in lipids and so we’ve got I think very good data on Contrave when it comes to the metabolic front, but as you point out we probably talk a little more frequently about the behavioral side just because we want people also to appreciate that the current 21st century epidemic in obesity does not represent a change in the gene pool, rather represents a change in behavior and food access and particularly our tendency to use food more and more for behavioral purposes when we’re stressed, when we’re depressed, when we’re angry and the fact that food becomes a reinforcer. People, as Tony points out often, don’t abuse broccoli but a Krispy Kreme donut or a Big Mac has a completely different reinforcing profile behaviorally and so there’s a whole other part of the brain involved in what we eat, when we eat, why we eat when we’re not hungry that’s really important for us to understand as well. So we want to make sure that people become increasingly aware of the behavioral component to complement their, I think, already high level of awareness about metabolic consequences if you’re obese.

Operator

There are no more questions at this time. This concludes our question-and-answer session today. Dr. Tollefson, would you like to make any final comments?

Gary D. Tollefson

Only to say that we thank you very much for joining us on the call today and we continue to appreciate your support. Thank you.

Operator

Thank you all very much for participating in the Orexigen Therapeutics conference call. This call will be archived on the Investor Relations section of the Orexigen’s website for 14 days. This concludes today’s event.

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Source: Orexigen Therapeutics Q4 2007 Earnings Call Transcript
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