Will Orexigen Win the Obesity Drug War?

Orexigen Therapeutics (NASDAQ: OREX  )  presented at the J.P. Morgan Healthcare Conference this week and outlined its plans for its obesity drug Contrave. Contrave has a previously announced PDUFA date of June 10, which means that's the date by which the Food and Drug Administration is expected to make an approval decision. But even if Contrave receives FDA approval, the drug could run into the same challenges that have blocked the progress of Vivus' (NASDAQ: VVUS  ) Qsymia and Arena's (NASDAQ: ARNA  ) Belviq.

What is Contrave?
Contrave combines the previously approved drugs naltrexone and bupropion. Naltrexone is used for the management of drug dependencies, while bupropion can help treat depression. Orexigen originally submitted an NDA for Contrave in 2011. An advisory panel voted in favor of approval with the caveat of a post-market cardiovascular outcomes study, but the FDA wanted data from a cardiovascular outcomes study before approval and sent Orexigen away with a rejection.

Contrave would become Orexigen's first drug to market, but will challenges and competition in the obesity drug market thwart Contrave's earning potential?  

The (potential) competition
Two years ago, Vivus and Arena were locked in one of the most highly anticipated pipeline battles in recent memory. Obesity seemed the next big indication since global incidences were on the rise and a new drug hadn't received FDA approval in over a decade. The new drugs were effective and, more importantly, safer than the prior generation of obesity drugs, such as Abbott's Meridia, which was pulled from the market due to cardiovascular risks.

But Qsymia and Belviq made it through the regulatory hurdles, launched onto the seemingly eager market-and fell short of expectations. With insurance reimbursement proving to be a challenge, patients decided to do without rather than pay out-of-pocket costs that start around $160 for a month's supply.  Instead of boasting about blockbuster sales, Vivus and Belviq were facing an uphill battle. 

But it's an uphill battle that's at least improving. Doctors wrote nearly 89,000 prescriptions for Belviq between June and November of last year with over 5,000 prescriptions in the first month of the period and 20,000 prescriptions in the last month. Approximately 403,000 Qsymia prescriptions were written between the drug's launch and December of last year. But one-fourth of those prescriptions were added in the fourth quarter. 

Will Contrave suffer a similar fate? Orexigen's drug doesn't have a safety or efficacy profile that makes it above and beyond the other approved drugs. But Contrave isn't a controlled substance, which might make doctors more willing to prescribe the treatment to patients. And the presence of bupropion-commonly prescribed as an antidepressant under the name Wellbutrin-could further increase doctor willingness, particularly in obese patients with depression symptoms but no current treatment. 

Orexigen also benefits from having Takeda as a partner on Contrave. While it's true that Arena's Eisai partnership hasn't proved terribly advantageous, Takeda has a little more muscle in the game.  

Takeda partnership
The benefit of Takeda's big pharma backing will kick in if the drug hits the market. Takeda has more than 2,000 people in its sales force who can potentially market the drug on-the-ground to health care providers. That compares to the roughly 200 person team Eisai put behind Belviq's launch.And Takeda has experience in marketing diabetes-related drugs with Actos. 

What were the terms of the partnership? Orexigen received a $50 million upfront payment from Takeda with an additional $1 billion possible through milestone payments. If the drug makes it to market, Orexigen will receive 20-35% royalties on net sales. Takeda would take care of the commercialization costs but Orexigen has the option to co-promote. The companies would split any post-marketing clinical costs.

Foolish final thoughts
Will Contrave achieve better sales than Qsymia and Belviq if the drug receives approval? Forecasting sales for the obesity market has proved to be very difficult to do, but doctors and insurers may find Contrave more attractive because it isn't a controlled substance and its constituent drugs have a strong prescribing history for their individual indications.

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Read/Post Comments (13) | Recommend This Article (2)

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.

  • Report this Comment On January 18, 2014, at 2:23 PM, biotechmethuka wrote:

    NO

  • Report this Comment On January 18, 2014, at 3:00 PM, Yale1066 wrote:

    NO...OREX will not win....and VVUS will go bankrupt...the only winners here will be the WS spinners pumping and then shorting OREX. No drug on the market yet but boy oh boy it has been presented as a slam dunk approval sure thing by MF and AF.

    Please do not attempt to rewrite the history of the FDA and DEA approval process for Belviq. ARNA longs simply know far too much....and by the way insurance coverage for Belviq will be ahead of the 50 % target mark by March 2014, Arena has 250 million in cash, and Easai is on the hook for all marketing and 90 % of additional research costs.

  • Report this Comment On January 18, 2014, at 3:20 PM, marp11 wrote:

    poor poor arna only names best bio tech of 2014..by your own MF..shorts are wasting time and money. belviq,pipeline ,cash,partners, deals milestones and ect ect

    im going away ...wake me at arna 50...i may sell my first 5000 shares,,

  • Report this Comment On January 18, 2014, at 3:21 PM, marp11 wrote:

    thats 400 reps by eisai,,,65,000 drs...oh and look for that 1st tv ad,,,,imminent,,,m fools ? perfect name

  • Report this Comment On January 18, 2014, at 3:23 PM, marp11 wrote:

    lets see now BELVIQ

    OBESITY CHECK

    SMOKING CESSATION CHECK

    T2 DIABETES CHECK

    ALCHOLAISM CHECK

    PIPELINE

    PULMONARY DISEASE CHECK

    NON OPIOID PAIN KILLER CHECK

    THROMBOSIS CHECK

    ECT ECT ECT

  • Report this Comment On January 18, 2014, at 3:24 PM, marp11 wrote:

    if the drug hits the market..

    EOM

  • Report this Comment On January 18, 2014, at 3:47 PM, feelinIrie wrote:

    OREX will not even get F.D.A. approval. Mark this post and come back on June 11th.

  • Report this Comment On January 18, 2014, at 5:17 PM, rteas wrote:

    Aren't you glossing over the side effects of Contrave?

  • Report this Comment On January 19, 2014, at 5:43 AM, marp11 wrote:

    looks like qysmia found to cause cleft palate by philly jury in borth defect case....google it\

    and then there was 1

  • Report this Comment On January 19, 2014, at 11:00 AM, marp11 wrote:

    so,mf done with VVUS pump...VVUS done,,,dead

    now they try OREX no drug,no money,no sales...

    that leaves ARNA tons of cash,no debt,huge partner,ROW deals in place,pipeline galore,,,,ect ect

    now lets say your masters had all shorted ARNA

    66 million shares,,,and no one will sell,and they cant cover...DTC ads on TV imminent

    what would you do??

  • Report this Comment On January 19, 2014, at 1:37 PM, bmc007 wrote:

    Well, to answer your question, IMO there are no winners in war - but we don't even have a battle here because there's one one team in the game and its already won it. ARNA - cream always rises to the top!!

  • Report this Comment On January 20, 2014, at 11:09 AM, jmp03172 wrote:

    Programs in the United States directed at the prevention and treatment of obesity and its' vast array of associated medical conditions is estimated to cost $200 billion. Disability claims, decreased work productivity, and the lower wages earned by the obese (primarily for women) contribute to many billions more. Medicare and Medicaid have been slow to respond, now only reimbursing for obesity screenings, intensive cognitive-behavioral counseling, dietary counseling by physicians, nutritionists, dieticians, and related professionals. In June of 2013, an act was introduced into Congress that includes Medicare part D coverage for approved obesity medications. It has yet to be addressed. It is only a matter of time, I believe, that these drugs will be covered by Medicare, after which most other insurers will follow suit. This will open the floodgates for Belviq, Qysmia, and, if approved, Contrave. As these drugs are prescribed in much greater numbers, physicians will be able to assess the efficacy and drawbacks of each one. I believe that Belviq, being the safest and offering a wider array of benefits, will be the drug of choice.

  • Report this Comment On January 21, 2014, at 10:54 AM, biogemfinder wrote:

    No it won;t win!

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