(OREX) Orexigen Therapeutics Gets Severe Setback from US Food and Drug Administration

Orexigen Therapeutics Inc. (OREX) was dealt a severe blow by the US Food and Drug Administration (FDA) when the regulatory body declined to approve its obesity drug, Contrave in the present form and issued a complete response letter (CRL). Contrave, which aimed at addressing the physiological and behavioral causes of obesity, has been co-developed with Japan’s Takeda.

While issuing the CRL, dated January 31, 2011, the FDA stated that it is concerned about the long-term cardiovascular safety profile of the obesity candidate and has asked Orexigen to conduct an additional study. The request to conduct an additional study means further bad news for Orexigen as this will push up its research and development expenses. Orexigen intends to meet the FDA to discuss the issues raised in the CRL.

The decision to issue a CRL to Orexigen surprises us since Contrave, a combination therapy, had received a favorable opinion from an advisory panel of the FDA in December 2010. The FDA’s Endocrinologic and Metabolic Drugs Advisory Committee had voted 13 – 7 in favor of approving the candidate and concluded that the potential benefits associated with the use of Contrave outweighed the potential risks.

However, the panel had also voted 11 – 8 in favor of a study to evaluate cardiac risks associated with Contrave but as a post-approval necessity. The FDA, while overruling the panel’s opinion, asked Orexigen to conduct such a study before the obesity candidate is approved.

We remind investors that the new drug application, seeking to market Contrave 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.

With the FDA ruling on Contrave, Orexigen shares the same fate as rivals Arena Pharmaceuticals Inc. (ARNA) and Vivus Inc. (VVUS). We note that, last year, the FDA declined to approve Arena’s and Vivus’ obesity candidates, lorcaserin and Qnexa respectively, in the present form because of safety concerns. The US agency issued CRLs to both companies like Orexigen.

The rejection of 3 diet pills in the present form coupled with the withdrawal of Abbott Laboratories’ (ABT) weight-loss drug Meridia from the market, following evidence that it increased the risk of heart attack and stroke, leads us to believe that the FDA is being extremely cautious about the safety profile of obesity drugs.

Our Recommendation

Currently we are ‘Neutral’ on Orexigen in the long-term. The stance is supported by the Zacks #3 Rank (short-term “Hold” rating) assigned to the company.

ABBOTT LABS (ABT): Free Stock Analysis Report

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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