Event – Orexigen approaching third obesity verdict

If forewarned is forearmed, Orexigen Therapeutics is heading into the final phases of the regulatory review of its obesity pill, Contrave, with a distinct advantage. Safety concerns were largely responsible for stalling Lorqess and Qnexa as well as the withdrawal of Meridia earlier this year, and with these events thoroughly picked over, this last man standing in the obesity race is aware of what is ahead.

Risk management will be scrutinised intensely at an advisory committee meeting on December 7, and the company has been preparing accordingly. Despite all this, most analysts believe the outcome is still too hard to call, given past surprises, although a good few remain cautiously optimistic. Success where others have fallen will mean rich rewards for Orexigen, but success is far from guaranteed at this stage.

Product Contrave
Company Orexigen Therapeutics
Market Cap $266m
Product NPV $1.22bn
NPV as % of Mkt Cap 459%
Event FDA advisory committee
Date December 7, 2010

In October, the regulator dispatched complete response letters to Orexigen’s rivals, Arena Pharmaceuticals and Vivus, requesting more long term safety information (Complete response letter revives Vivus, October 29, 2010).

These setbacks - in the case of Arena a very surprising setback, with an undisclosed cancer signal derailing the application – have certainly given Orexigen the opportunity to watch and learn. Safety will be a key focus for the panel, and ultimately the FDA, and management have prepared to go into the review period sharply focused on addressing these issues.

In terms of managing the risk, the company has already prepared a draft label to help identify appropriate patients, and is already anticipating labelling recommendations that will propose taking non-responders off the medicine. A risk evaluation and mitigation strategy (REMS) is guaranteed, and Orexigen is also planning to capture more data post-approval.

Specifically, the primary areas of focus for risk/benefit discussion at the adcom are likely to be effects on blood pressure and pulse, as well as seizure, which are known effects of bupropion, one component of Contrave. However, the company is relying on the fact that the two components of the pill are very well known.

Bupropion is a former GlaxoSmithKline drug, Wellbutrin, that has been available to treat depression for over a decade; risks include raised blood pressure, seizure and suicidal thoughts, for which it carries a black box. Naltrexone, Contrave's second component which is used to treat addiction, is known to cause headaches, vomiting and hallucinations.

These agents have a long history which the company hopes will allay any fears of unexpected safety issues emerging, should the drug be approved. In particular, no evidence has emerged that these compounds carry any cardiovascular risk, a big worry for obesity agents and one that finally prompted the withdrawal of Abbott Laboratories’ Meridia. In fact trials showed Contrave lowered triglycerides and raised HDL, and scored well on other cardiovascular markers.

Risks remain

Still, with bupropion and naltrexone normally taken for relatively short periods of time, there remains a risk that the FDA and its advisory committee will not be satisfied with long term safety. Qnexa, which is also a combination of two long-established products (phentermine and topiramate), was mainly rejected by its advisory panel for this very reason. 

On efficacy, the drug should pass. The company’s phase III programme exceeded the FDA’s requirement that a product show at least a 5% loss of body weight.

With briefing documents due to emerge possibly at the end of this week, the company will finally know what it is up against.

Still, even if the tone is more onerous than expected, Orexigen has a significant cushion in partner Takeda, which bought US rights to the drug earlier this year. The company ended September with cash of more than $100m, whilst the Japanese company will help fund any further work required, before approval.

With a further $100m milestones due on approval, Orexigen will be in a very strong position if all goes well.

Wild swings

In terms of investor sentiment, over the last month some have become more negative: by mid-November, the so-called short interest in the stock had risen to 20% - meaning a fifth of the company’s shares have been placed by traders betting on a fall.

However at the same time Orexigen’s share price has not seen the wild swings experienced by Arena and Vivus; both stocks climbed substantially ahead of their advisory committees, only to fall sharply afterwards. Orexigen’s stock was trading at $5.60 today, and has not moved significantly as the fate of rivals has emerged.

Clearly many investors will be taking a more cautious stance this time round, and rightfully so. But should Orexigen win backing where others have failed, the stock will remain anything but subdued.

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