After Orexigen’s Implosion, Now What? (OREX, VVUS, ARNA, ABT)

February 1, 2011 · Filed Under Cardiac, Depression, Diabetes, fda, obesity 

Orexigen Therapeutics, Inc. (NASDAQ: OREX) is beyond ugly after the FDA said that the company must now submit more trial data before its new diet pill Contrave may be cleared for sale.  The vote was 13-against versus 7-for votes and now the FDA is asking for another study on the drug’s cardiovascular risks.

Outside FDA advisers said back in early December that the benefits of the weight loss exceed the dangers of a higher pulse and blood pressure, with the indication that a larger study targeted on risks of the heart might until after the final drug approval.  That wasn’t so.

Both VIVUS Inc. (NASDAQ: VVUS) and Arena Pharmaceuticals Inc. (NASDAQ: ARNA) have been in a race with Orexigen to introduce the first approved diet pill for weight loss in a about a decade.  Now all of these products are on the back-burner and approval will not likely be seen in the near-term on any of these drugs.

Orexigen is down 71% at $2.63 and shares hit a new year low and the new 52-week range is $2.50 to $11.15.  VIVUS is down 15% at $7.57 and its 52-week range is $4.69 to $13.68.  Arena shares are flat at $1.58 as its hope was already diminished.

Abbott Laboratories (NYSE: ABT) recently pulled its Meridia weight loss pill off of the market due to heart risks.  Orexigen was expected to receive royalties from partner Takeda if it was approved.  At issue with all these drugs is that they all have the possibility of becoming blockbuster drugs with more than $1 billion in annual sales from America alone. The competing drugs Qnexa from VIVUS have concerns about birth defects tied to one of the ingredients, while lorcaserin from Arena has tumor risks associated with it.

Contrave uses two approved drugs as a cocktail and the target areas are different parts of the brain which influence appetite and influence cravings.  One is an antidepressant and one is a treatment for alcohol and opioid addictions.  While patients lost generally 5% of their weight after a year, the weight loss group had a higher pulse and higher blood pressure than the placebo.

What just happened is that Orexigen was put in a situation where it has to evaluate what to do with its lead candidate.  A new trial will easily run into the millions and millions of dollars and the time frame could easily run well over a year.  Just how big the costs and how long the time would be, well that is still up for debate.  Orexigen had just over $100 million in cash and short-term investments at the end of September-2010.  Chances are that this is not enough cash.

Things went from maybe to awful here.  Now it is dire.

JON C. OGG

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