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FDA's Bizarro World - Orexigen Gets Panel Approval!
Welcome to Bizarro World, courtesy of the FDA. At the beginning of 2010, there was a widespread belief that Vivus (Nasdaq:VVUS) would get approval for its obesity drug Qnexa and that Arena Pharmaceuticals' (Nasdaq:ARNA) lorcaserin had at least a fighting chance; Orexigen (Nasdaq:OREX) was the long-shot candidate with its drug Contrave. When FDA panels subsequently voted down both Qnexa and lorcaserin and the FDA followed up with complete response letters (rejections), most observers thought Contrave had little chance.
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Late on Tuesday, the FDA's panel reviewing Contrave voted 11-8 to recommend approval. That is a huge win for Orexigen. It also looks to be a boon for Vivus and Arena as well, though, as it raises the possibility that these companies will eventually convince the FDA to grant approval.
Going Through the Details
Contrave is a combination drug that blends the long-approved drugs naltrexone (originally approved to treat addiction) and bupropion (depression) into a single sustained-release treatment. Contrave missed one of the FDA's efficacy benchmarks (an average of 5% weight loss), but surpassed the other (35% or more patients achieving 5% or better weight loss). In terms of safety, the trials have shown some risks relating to blood pressure, but far and away the worst side-effect was nausea (which has led as many as one-quarter of patients in trials to drop out). (For more, see Orexigen Finds A Cautious Partner.)
Although Contrave did not show the efficacy of Qnexa or the safety profile of lorcaserin, it seems that the drug's "Goldilocks" combination was the winning formula for the FDA's panel. Nausea is not a side effect that is likely to deter the FDA from approval, and Contrave's efficacy is certainly sufficient to say it works. It was worth noting, though, that the panel also voted 11-8 to recommend that the FDA require a large-scale cardiovascular risk study after approval, and at least one panelist did try to compare this drug to Abbott's (NYSE:ABT) Meridia, which was pulled from the market due to cardiovascular risks.
And the Last Shall Be First?
With a Prescription Drug User Fee Act (PDUFA) date of January 31, investors will not have long to wait to find out whether Contrave will be the first new obesity drug in over a decade. At this point, it is anybody's guess as to whether the FDA will grant approval or issue a complete response letter and demand more data on Contrave's potential cardiovascular risks.
From a logical standpoint, it seems as though the FDA will approve this drug - the efficacy is there, the trials were clean, and the side effect profile is not only moderate, but it also seems that patients who are likely to experience side effects (or at least certain side effects) can be identified early on. But these are not normal times for the safety-obsessed FDA, so it's hard to say that shareholders in Orexigen or Takeda should not be a little concerned. Anybody who has watched the FDA for a while will recognize that things are different now; a recent comment from device industry veteran Terry Gregg (CEO of DexCom (Nasdaq:DXCM)) calls this the "worst" FDA environment in 40 years. (For more, see FDA To Obesity Drugs: Drop Dead.)
Reasons For Hope ... And Caution
Listening to the panelists discussing Contrave, it seemed as though some of them almost felt they had a duty to approve at least one of the three new obesity drugs, and Contrave may indeed be the best compromise between efficacy and safety. What remains to be seen is what the market potential for Contrave will be. It is easy to suggest that an effective obesity drug could produce $2 billion or more in sales each year, but the significant nausea-related drop-out rates (as well as potential FDA labeling restrictions) could shrink that estimate significantly, as could any eventual approvals for Vivus or Arena.
I certainly had this one wrong; I thought Qnexa and lorcaserin would make it and Contrave would not. This is one case, though, where I am happy to be wrong - an effective obesity drug will be a help to the millions of people who need (and/or are trying) to lose weight, and the biotech industry as a whole certainly could use some good news going into 2011. (For more, see Measuring The Medicine Makers.)
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IN PICTURES: 9 Simple Investing Ratios You Need To Know
Late on Tuesday, the FDA's panel reviewing Contrave voted 11-8 to recommend approval. That is a huge win for Orexigen. It also looks to be a boon for Vivus and Arena as well, though, as it raises the possibility that these companies will eventually convince the FDA to grant approval.
Going Through the Details
Contrave is a combination drug that blends the long-approved drugs naltrexone (originally approved to treat addiction) and bupropion (depression) into a single sustained-release treatment. Contrave missed one of the FDA's efficacy benchmarks (an average of 5% weight loss), but surpassed the other (35% or more patients achieving 5% or better weight loss). In terms of safety, the trials have shown some risks relating to blood pressure, but far and away the worst side-effect was nausea (which has led as many as one-quarter of patients in trials to drop out). (For more, see Orexigen Finds A Cautious Partner.)
Although Contrave did not show the efficacy of Qnexa or the safety profile of lorcaserin, it seems that the drug's "Goldilocks" combination was the winning formula for the FDA's panel. Nausea is not a side effect that is likely to deter the FDA from approval, and Contrave's efficacy is certainly sufficient to say it works. It was worth noting, though, that the panel also voted 11-8 to recommend that the FDA require a large-scale cardiovascular risk study after approval, and at least one panelist did try to compare this drug to Abbott's (NYSE:ABT) Meridia, which was pulled from the market due to cardiovascular risks.
And the Last Shall Be First?
With a Prescription Drug User Fee Act (PDUFA) date of January 31, investors will not have long to wait to find out whether Contrave will be the first new obesity drug in over a decade. At this point, it is anybody's guess as to whether the FDA will grant approval or issue a complete response letter and demand more data on Contrave's potential cardiovascular risks.
From a logical standpoint, it seems as though the FDA will approve this drug - the efficacy is there, the trials were clean, and the side effect profile is not only moderate, but it also seems that patients who are likely to experience side effects (or at least certain side effects) can be identified early on. But these are not normal times for the safety-obsessed FDA, so it's hard to say that shareholders in Orexigen or Takeda should not be a little concerned. Anybody who has watched the FDA for a while will recognize that things are different now; a recent comment from device industry veteran Terry Gregg (CEO of DexCom (Nasdaq:DXCM)) calls this the "worst" FDA environment in 40 years. (For more, see FDA To Obesity Drugs: Drop Dead.)
Reasons For Hope ... And Caution
Listening to the panelists discussing Contrave, it seemed as though some of them almost felt they had a duty to approve at least one of the three new obesity drugs, and Contrave may indeed be the best compromise between efficacy and safety. What remains to be seen is what the market potential for Contrave will be. It is easy to suggest that an effective obesity drug could produce $2 billion or more in sales each year, but the significant nausea-related drop-out rates (as well as potential FDA labeling restrictions) could shrink that estimate significantly, as could any eventual approvals for Vivus or Arena.
I certainly had this one wrong; I thought Qnexa and lorcaserin would make it and Contrave would not. This is one case, though, where I am happy to be wrong - an effective obesity drug will be a help to the millions of people who need (and/or are trying) to lose weight, and the biotech industry as a whole certainly could use some good news going into 2011. (For more, see Measuring The Medicine Makers.)
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by
Stephen D. Simpson, CFA
Stephen D. Simpson, CFA, is a freelance financial writer, investor, and consultant. He has worked as an equity analyst for both sell-side and buy-side investment companies in both equities and fixed income. Stephen's consulting work has focused primarily upon the healthcare sector, while he has also written extensively for publication on topics pertaining to investments, security analysis, and healthcare. Simpson operates the Kratisto Investing blog, and can be reached there.
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