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.