Orexigen Therapeutics (NASDAQ:OREX) recently announced that the Food and Drug Administration was delaying an approval decision on the biotech's obesity drug Contrave for three months.
On the surface, the delay seems harmless. In the press release, Orexigen said that "[d]iscussions around the package insert and other post-marketing obligations are ongoing." That's biotech code for "we're going to get approved" since there's no reason for the FDA to discuss post-marketing obligations if the agency isn't going to authorize Orexigen to market the drug.
What's a little worrisome is that the company's ongoing outcomes study of Contrave was the basis for reapplication after the FDA rejected the initial application because of the potential for the drug to cause heart problems. Orexigen seemed to have met all the requirements the FDA set out, but investors only get Orexigen's version of the requirements. Perhaps the FDA is moving the goal posts, or maybe Orexigen didn't quite understand what the agency wanted.
The delay isn't likely to much benefit Orexigen competitors Arena Pharmaceuticals (NASDAQ:ARNA) and VIVUS (NASDAQ:VVUS). As senior biotech specialist Brian Orelli and health-care analyst David Williamson discuss in the video below, sales of Arena Pharmaceuticals' Belviq and VIVUS' Qsymia are so low that Contrave taking market share won't materially affect them. In fact, launching Contrave -- whenever it happens -- could benefit Arena and VIVUS because the market will hopefully expand with an additional set of sales reps talking to doctors about the obesity market.
Brian Orelli, David Williamson, and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.