Orexigen (NASDAQ:OREX) announced on July 30 that the company has received a List of Outstanding Issues (LOI) in the form of a 180 day Letter from the Committee for Medical Products For Human Use (OTCQB:CHMP) regarding the anti-obesity drug Contrave. The company disclosed that the LOI included new issues that were not brought up previously in the 120 day letter the company had previously addressed. Orexigen also stated that CHMP wanted additional information regarding the suppliers of components in the drug.
While the company expressed that it remained positive on the prospects of drug approval in Europe, the new issues were substantial enough that Orexigen is seeking a 30 day extension. Orexigen disclosed that it feels that tests in its Light Study can address most of the concerns raised by CHMP, but that in order to compile information from suppliers that more time was needed. As a result the company plans to respond to the 180 day letter in September.
These statements from the company seem to make logical sense, but one has to wonder about the timing. The proposed answer to CHMP now falls after the September 11th date that the company is anticipating a decision from the FDA on the same drug.
Orexigen is the third player to make an attempt at getting approval for an anti-obesity drug in Europe. Vivus (NASDAQ:VVUS) sought approval for Qsymia, was rejected, and then rejected again on appeal. Arena Pharmaceuticals (NASDAQ:ARNA) withdrew its application rather than face what was slated to be a rejection. Risk vs. Reward was a big component in the process for both Arena and Vivus. That same dynamic was also brought up in the LOI for Contrave.
It is certainly possible that Orexigen can ultimately gain approval, but the fact that new issues have been raised with the 180 day LOI that in many ways mimic the experiences of Vivus and Arena give reason for pause. Is it possible that Contrave meets with ultimate failure in Europe like its counterparts Vivus and Arena? I think investors owe it to themselves to consider that as the ultimate outcome.
If we take a conservative approach to this and assume that Europe will not approve, then some of the potential value in the equity is undermined. While the bullish investors may not appreciate this thinking, there is enough previous experience to warrant erring on the side of being more conservative.
In my opinion the pending FDA decision in the United States is more important than ever now. Prospects of U.S. approval look good in that the delay of the U.S. decision is said to be negotiations regarding post marketing requirements. The fact that the negotiations seem to be at the post marketing level would seem to indicate that an approval is very possible depending on an agreement of what types of studies will be required after approval.
Sales of competing drugs already on the market in the United States have not been anywhere near the levels expected by the street. The thought that Orexigen could be the first of the three approved in Europe was something that intrigued many. With this news today some of the thunder has disappeared for the near term. Stay Tuned!
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