Are Allergan and Orexigen Warming Up?

Biopharmaceutical company Orexigen Therapeutics  (Nasdaq: OREX  ) announced last Friday that David Endicott has joined the company's board of directors. Endicott currently serves as president of Allergan's (NYSE: AGN  )  Medical, Asia Pacific and Latin America business unit, and has been with Allergan since 1986.

Some biotech watchers with an ear for intrigue might suspect that there's more to the story. Could this move portend a closer relationship between Orexigen and Allergan? Let's take a look.

Board-dom
It's quite easy to argue the point that this was simply another run-of-the-mill addition to the board of directors and nothing more. Two reasons, in particular, seem to rule out anything more juicy.

First, Orexigen already counts several other current biotech executives from other companies on its board. Patrick Mahaffey is CEO of Clovis Oncology (Nasdaq: CLVS  ) . Dr. Peter Honig is head of Global Regulatory Affairs for AstraZeneca (NYSE: AZN  ) . The presence of these two men on Orexigen's board doesn't appear to have translated into any further business relationships between their respective companies.

Second, Allergan seems to be moving away from its only business that even remotely relates to Orexigen. One could conclude that there might be some synergies between Allergan's obesity intervention unit, which makes lap bands and the Orbera intragastric balloon system, and Orexigen's Contrave obesity drug.

However, Allergan announced in October that it planned to explore potentially selling the obesity intervention business. Orexigen isn't in a position to buy the unit as it prepares to hopefully launch Contrave, so that development might seem to nix the possibility of the two organizations teaming up.

Chessboard
Conspiracy buffs could make a couple of points of their own, though. Their argument would probably be that the appointment of Endicott is only the first move in a larger game of chess that ultimately leads to some partnership between Allergan and Orexigen.

While Orexigen does have other current biotech executives on its board, Endicott's appointment came out of the blue. There was no vacancy to fill. Regular board elections occurred in June. A legitimate question could be raised as to why the company felt that naming an additional director at this time was so important.

Proponents of the there's-more-to-the-story view could also parse the wording of Allergan's October announcement, where the company didn't actually say that it was going to sell off the obesity intervention unit. Rather, it stated that it was "exploring strategic options for maximizing the value of its obesity intervention business, including among other things, a potential sale" of the unit. "Strategic options" can include many possible alternatives, including joint ventures.

Foolish take
I wouldn't totally rule out the possibility of some future development, because anything is possible in the world of biotech. At this point, though, the addition of Endicott doesn't imply anything about a possible relationship between Orexigen and Allergan.

Regardless of board moves, Orexigen should still be a good stock pick, and I have maintained my CAPScall. Arena (Nasdaq: ARNA  ) and VIVUS (Nasdaq: VVUS  )  hit the market sooner with Belviq and Qsymia than Orexigen likely will with Contrave, but I think there are some advantages to being able to learn from its competitors' lessons. Another plus is that Contrave isn't likely to require DEA scheduling, unlike Belviq and Qsymia.

I think Orexigen should do well without the need for help from a bigger player such as Allergan. I do enjoy a good conspiracy theory, though. Maybe the next director will be an alien released from Area 51 who will prove that the U.S. didn't land on the moon. Anything is possible.

No conspiracy, just the facts
It's certainly no conspiracy theory that the ravages of America's obesity epidemic are a challenge of epic proportions. However, a group of drug companies are looking to change everything. Newly approved drugs could help to reverse this deadly course while reaping massive profits for investors in the process. Learn about the risks and opportunities of one of these companies in our new premium report on VIVUS. It's such an important story that we have our top heal-care writer on the job, so make sure to secure a copy today by clicking here now.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2137702, ~/Articles/ArticleHandler.aspx, 10/1/2014 6:53:24 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement