Can Orexigen Therapeutics Catch Up With Arena Pharmaceuticals and VIVUS?

Orexigen Therapeutics (NASDAQ: OREX) will release its quarterly report on Tuesday, and investors have gotten increasingly nervous in recent months about the drug company's future prospects. Although its Contrave obesity drug stands a good shot at gaining approval in the U.S. and Europe in the near future, it will have to get past two competing drugs: Qsymia from VIVUS (VVUS) and Belviq from Arena Pharmaceuticals (ARNA). Does Contrave stand a chance?

Orexigen and its two main rivals all developed obesity drugs at roughly the same time, aiming to become the first treatments approved for the indication in years. All three of their drugs initially got rejected in late 2010 and early 2011, but the FDA required Orexigen to run another large clinical trial to address safety concerns, giving VIVUS and Arena the inside track to their eventual approval. Now, though, Orexigen is getting close to a point at which it can try for FDA approval again. Let's take an early look at what's been happening with Orexigen Therapeutics over the past quarter and what we're likely to see in its report.

Stats on Orexigen Therapeutics

Source: Yahoo! Finance.

Will Orexigen finally start moving forward next year on earnings?
Analysts have become more positive about Orexigen's earnings prospects, cutting their loss estimates for the full 2014 year in half in recent months. The stock, though, has moved steadily lower, falling 31% since early August.

Given that Orexigen doesn't have any approved products on the market, earnings reports tend to focus on future expectations. In August, the company said that the American Medical Association's decision to classify obesity as a disease could become a door-opener for greater use of obesity drugs like Contrave. Orexigen also said it would submit Contrave for approval in Europe before the end of the year, with an FDA filing likely to come in a similar time frame.

In the meantime, though, both VIVUS and Arena Pharmaceuticals have struggled with their obesity drugs and are taking steps to try to bolster their sales. Arena recently expanded its marketing agreement with Japan's Eisai in order to spur further use of Belviq, which hasn't produced the sales that Arena's investors had hoped to see. VIVUS's Qsymia sales only added up to $11.1 million during the quarter, with the company having to lay off a sixth of its workers as a cost-cutting measure. Orexigen has already lined up Takeda Pharmaceuticals to sell Contrave in North America.

Despite the efforts of Arena and VIVUS, Orexigen has some advantages over both. Some analysts have argued that Contrave has advantages over both Belviq and Qsymia, with a more attractive mix of effectiveness and safety than either of its two rivals. If Orexigen can convince reluctant doctors to prescribe Contrave over the other two drugs, it could still end up being the winner.

In the Orexigen earnings report, watch to see how the company European approval plans go. With the potential of gaining early access to the European market, Contrave could get its biggest success across the Atlantic if Orexigen can work quickly.

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