FDA breathes life into Orexigen with new clinical plan

Orexigen Therapeutics has gained a new lease of life. The FDA has agreed a protocol for a cardiovascular outcomes trial on the once-rejected obesity drug Contrave that the California group optimistically believes could clear the way for approval as soon as 2014.

But before it can complete that study, Orexigen will have to make some difficult strategic decisions. Executives acknowledged that the cost of the study could be well beyond current cash resources. They said no new fundraisings are planned and instead suggested the safety valve of ex-US licensing to fill any gaps, a gamble many partners will be reluctant to take without heavy back-end loading given the history of obesity drugs.

Swings and roundabouts

However, investors were pleased by this unexpected turn of events. Shares in Orexigen were up 56% to $2.29 in early trade today, although that price is well off the $9.09 hit the day before FDA’s complete response letter on Contrave (FDA wipes obesity slate clean with rejection of Orexigen's Contrave, February 1, 2011).

The FDA decision clears a clinical and regulatory pathway that had been blocked since June, when regulators would not consider a company proposal to limit Contrave’s use to obese patients with low cardiovascular risk until an outcomes trial could be completed.

The FDA initially rejected Contrave, a combination of the depression drug bupropion and the addiction medication naltrexone, because of worries over how its effects on blood pressure and pulse might result in excess cardiovascular events in a large population taking the drug chronically. More than one-third of the US population is estimated to be obese, meaning millions of people could be taking the drug, so safety signals have been a big agency concern.

Orexigen shares had already received a boost last week with the news that fellow obesity-drug developer Vivus had been allowed to resubmit its new drug application for Qnexa (Transcept and Vivus hoping to buck the trend with another approval chance, September 19, 2011). Shares in Orexigen rose 14% September 15, the day Vivus got its good news as investors saw positive readthrough; likewise with Arena Pharmaceuticals, shares of which rose 6% on hopes for its candidate Lorqess.

Trial trials

In a call with investors yesterday, Orexigen executives said that based on their discussions with FDA officials the new regulatory pathway would allow for approval should an interim analysis of trial data show no increased cardiovascular risk. To achieve the statistical target agreed, the study would require fewer than 10,000 patients and less than two years, at which time the company estimated the necessary 87 events needed to assess cardiovascular risk would have occurred.

They also calculate running costs of $10,000-$12,000 per patient, making full enrolment of 10,000 equal $100m. At the end of the second quarter, the company had $70m in cash. North American partner Takeda paid $50m in summer 2010 for US rights to Contrave, but does not owe any milestones until after approval, at which point Orexigen is eligible for $100m. Thus there is a clear gap in funding.

In what looked like an attempt to mitigate this gap, executives told investors that the study may not require the full 10,000 enrolees to achieve the necessary number of events for an interim analysis, so the costs may be lower than $100m. No fundraising is planned – the last share sale was an $82m offering in July 2009 – as such licensing ex-North American rights may be a possibility to fill any shortfalls. Renewing partnership talks is one of the three priorities company executives listed.

Little upfront

However, given the recent history of the obesity space, it is hard to see a big pharma partner willing to pay a heavy upfront fee to secure Contrave at this stage. In the last year all three obesity candidates stumbled at the final hurdle over safety worries and the one major incumbent, Meridia, was withdrawn by maker Abbott Laboratories. As such, this represents a category in which the regulators have shown themselves extremely risk averse in spite of the unmet medical need and the lack of non-surgical alternatives.

Add upon that the possibility that Qnexa, should it be approved in its next go-round with the agency, could be well-established by the time Contrave launches. Meanwhile, such competitors as Novo Nordisk’s Victoza are nearing completion of their clinical phase, potentially further diluting the market opportunity.

Thus, as highlighted by analysts from Leerink Swann in a note today, another fundraising seems inevitable for Orexigen, despite management comments to the contrary. So, although the FDA gave investors reason to celebrate today, the next news may not be quite so positive.