With it's FDA Approval on September 11th 2014, OREX's Contrave became only the third anti-obesity drug to be approved by the FDA in over 10 years. This is following the approval of Belviq (Arena Pharmaceuticals) and Qsymia (Vivus) back in 2012.
Following it's approval OREX stock has tanked, dropping nearly 35% from it's pre-approval stock price. With many attributing the fall to factors such as: 1) a 47 page label including an on-the-box warning notifying healthcare professionals of the potential risk of suicidal behaviours, 2) a second warning stating "the effects of Contrave on cardiovascular morbidity and mortality have not been established", and 3) post-approval expenses (pertaining to additional cardiovascular studies) which could far exceed $100 million dollars (this number is based on the $100 Contrave raised for a previous cardiovascular study in 2011).
However are these factors really worth a 35% drop in stock price?
1) The FDA requires all anti-depressant drugs carry a boxed warning stating that antidepressants may increase the risk of suicide. Bupropion (one key ingredient in Contrave) got bundled in with this warning as the FDA needed to combine the results of 295 trials of 11 antidepressants in order to obtain statistically significant data. However, one thing that is VERY important to note is that "when considered in isolation, (risks of) bupropion were not statistically different from placebo." (see slide 26) Meaning that despite the need for this warning due to the category of drug, doctors have known for years that Bupropion does not increase risk of suicidal tendencies any more than sugar pill. This is one reason Bupropion (Wellbutrin) is one of the most commonly prescribed anti-depressants in the world, and it's those same doctors who will be prescribing Contrave.
2) A warning stating "the effects of Contrave on heart health are unknown", may seem worrisome at first. However, it is important to keep in mind that a cardiovascular study was required prior to gaining FDA approval, the results of which were very positive. Also, as part of it's post-approval obligations, Contrave has to do additional cardiovascular studies. Should these see the same success as the initial cardiovascular studies, it might not just warrant removing the warning, but might give OREX's Contrave data that shows it is not only heart safe, but combined with the expectant patient weight-loss, is actually beneficial for patient heart health.
3) As for post-approval costs relating to cardiovascular studies, these are likely to be countered by the $100 million in milestone payments due to OREX by it's marketing counterpart Takeda. Also as previously mentioned, success with these studies could actually give OREX a lot of marketing power both in terms of safety and efficacy.