Orexigen shares fall on mixed view of study data

Shares of Orexigen Therapeutics Inc. fell Friday after the company's obesity drug showed mixed results on meeting Food and Drug Administration benchmarks for approval.

The stock fell 95 cents, or 15.7 percent, to close at $5.10. Shares have traded between $1.55 and $14.36.

The La Jolla, Calif.-based company said its developing drug Contrave met all the study goals in a late-stage clinical trial. But, the results were mixed when it came to proposed FDA benchmarks set for obesity drugs. The weight-loss difference between Contrave and placebo patients was only 4.2 percentage points, short of the FDA's draft standard of at least 5 percentage points.

But 41.5 percent of Contrave patients, or more than double the amount of placebo patients, lost more than 10 percent of their body weight. That topped a separate draft FDA benchmark, calling for at least a 5 percent body-weight reduction from 35 percent of the patients taking the drug. It also calls for a doubling in patients meeting that benchmark compared with the placebo group, which Contrave achieved.

In a statement late Thursday, the company said it believes the results satisfy the categorical benchmark set by the FDA. It is also conducting three additional late-stage studies, with results expected later this year.

Still, even the most minute differences in study data could play a large role in what looks to become a three-way race between Orexigen; Mountain View, Calif.-based Vivus Inc.; and San Diego-based Arena Pharmaceuticals Inc. Each company has an obesity drug in late-stage development, with goals of asking for FDA approval by the end of 2009.

While investors continued to drive down shares Friday, analysts took a more upbeat view of the data.

"We think that Orexigen makes a good case that the data do (meet the FDA's benchmark), and therefore think it likely that the FDA will consider this one of two positive efficacy studies needed for approval," Cowen and Co. analyst Phil Nadeau said in a note to investors.

He reaffirmed a "Outperform" rating for Orexigen and said the drug could see at least $500 million in annual revenue if it just captures a fraction of the market.

Meanwhile, JMP Securities analyst Charles C. Duncan reaffirmed a "Market Outperform" rating, also calling the study outcome positive.

"In our view, the positive Phase III results from this challenging study are the first to demonstrate Contrave efficacy, possible approvability, and predictive value for success from the remaining three Phase III trials anticipated to report results yet in 2009," he said in a note to investors.

Contrave may have to contend with competition from the drug Qnexa, which is being developed by competitor Vivus. That company reported positive results on a late-stage study in December. Shares fell 15 cents, or 2.8 percent, to $5.18 in midday trading Friday.

Arena is expected to release late-stage study results on its drug candidate lorcaserin near the end of March. Its stock fell 35 cents, or 8.6 percent, to $3.70.