Orexigen Falls Short

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We often refer to drug development as a marathon because of the long road it takes to get a drug through clinical trials and the regulatory process. Orexigen (Nasdaq: OREX  ) seemed to be in a perfect position to win the race, having passed the obesity drug leaders -- VIVUS (Nasdaq: VVUS  ) and Arena Pharmaceuticals (Nasdaq: ARNA  ) -- and used their experience to gain positive Food and Drug Administration advisory panel results.

And then it bonked, a term marathoners use for hitting the wall. Down 70%, it's just sitting there paralyzed.

The FDA is requiring Orexigen to run a trial measuring cardiovascular events in patients taking its obesity drug, Contrave, before it can be approved. Investors were hoping that the agency would follow the FDA panel's 11-8 recommendation to allow the company to run the trial after the approval.

The FDA's move doesn't shock me. As I said when the FDA's experts voted, many seemed to want a pre-approval trial but didn't think that moving the goalposts on the company was fair. The FDA cares a lot more about safety than it does fairness.

How long are we talking? It's still too early to tell. Management needs to meet with the FDA to see exactly how large a trial should be and for how long the agency wants it to follow patients.

The Scout trial measuring cardiovascular events in patients taking Abbott Labs' (NYSE: ABT  ) Meridia took seven years to read out data. Of course, Meridia was already on the market, so Abbott had more to lose by completing the trial than by dragging it out. Presumably, Orexigen can do it in less time, but we're still talking years.

Orexigen's best move might be to climb on a stretcher and head home to start training for the next marathon. The drugmaker has a second-generation obesity drug called Empatic, which also contains bupropion, the active ingredient in GlaxoSmithKline's (NYSE: GSK  ) Wellbutrin and the suspected culprit for the potential heart issues in Contrave. Empatic appears to work better than Contrave in early trials, and if Orexigen is going to have to run outcomes studies for both drugs separately, it seems like a waste of money to run them on Contrave, only to have Empatic cannibalize sales fairly soon after approval.

I know Orexigen looks tempting at the beaten-down levels, but investors would be wise to wait until the company picks itself up off the pavement and tells investors exactly which path it plans to run down next.

Interested in keeping track of Orexigen as it makes a decision about what to do next? Click here to add it to My Watchlist, which will help you keep track of all our Foolish analysis on Orexigen.

GlaxoSmithKline is a Motley Fool Global Gains selection. The Fool owns shares of GlaxoSmithKline. Motley Fool Alpha owns shares of Abbott Laboratories. 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.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.

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

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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 February 01, 2011, at 10:18 PM, BlueInsight wrote:

    Interesting that VIVUS is encouraged to tap pre-existing data available for generic drug topirimate to assess risk of teratogenicity, while the FDA is requesting a new study (likely costing hundreds of millions of dollars) to assess the cardiovascular risk for the generic drug bupropion.

    There has been so much controversy and drama regarding the 3 new obesity candidate medications this year. But through it all, the FDA seems to have a strong bias favoring VIVUS.

  • Report this Comment On February 02, 2011, at 11:50 PM, akbarcaskey678 wrote:

    WHY IS OREX still trading higher???

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