FDA Panel Backs OREX's Contrave - Analyst Blog

Orexigen Therapeutics Inc. (OREX) received a boost when an advisory panel of the US Food and Drug Administration (FDA) voted in favor of approving its obesity drug, Contrave. Contrave, a combination therapy, aims at addressing the physiological and behavioral causes of obesity.

The FDA's Endocrinologic and Metabolic Drugs Advisory Committee voted 13 - 7 in favor of approving the drug and concluded that the potential benefits associated with the use of the drug outweighed the potential risks.  The panel also voted 11 - 8 in favor of a study to evaluate cardiac risks associated with Contrave as a post-approval necessity.

A final response from the FDA regarding the approval of Contrave is expected early next year (target date: January 31, 2011). Even though the regulatory agency is not bound to follow the advice of its advisory committee, the recommendation of the panel is usually considered while deciding the fate of a candidate.

We remind investors that the New Drug Application (NDA), seeking to market the obesity candidate in the US, was submitted by Orexigen in March 2010. The substantial amount of evidence gathered through the Contrave Obesity Research (COR) clinical program formed the basis of the application. The COR program studied more than 4,500 patients.

The positive opinion for Orexigen's obesity candidate is a welcome departure from the FDA's refusal to approve Arena Pharmaceuticals Inc.'s (ARNA) obesity candidate lorcaserin and Vivus Inc.'s (VVUS) obesity candidate Qnexa in the present form because of safety concerns. Both rivals failed to get a positive opinion from the advisory panels. Subsequently, the FDA issued complete response letters to the companies.

Lucrative Obesity Market

Obesity is an attractive market that could be worth many billions of dollars. It is estimated that obesity affects over 400 million people globally. Moreover, obesity is linked to increased health risk of several medical conditions. Given the huge unmet need in this market, the successful development of the obesity pipeline would help drive growth at Orexigen.

Our Recommendation

Orexigen Therapeutics currently has a Zacks #3 Rank, which translates into a short-term ‘Hold' rating indicating that the stock is expected to perform in line with the overall US equity market for the next 1-3 months.

We are also Neutral on the stock in the long term. Our long-term Neutral stance on Orexigen indicates that the stock is expected to replicate its short-term performance, but over 6+ months. Consequently, we advise the investors to retain the stock over the time-period.

 
ARENA PHARMA (ARNA): Free Stock Analysis Report
 
OREXIGEN THERAP (OREX): Free Stock Analysis Report
 
VIVUS INC (VVUS): Free Stock Analysis Report
 
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