Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of obesity drugmaker Orexigen Therapeutics (NASDAQ:OREX) skyrocketed by more than 55% today on unusually high volume. What appears to be driving this massive move upwards is an 8-K filing with the SEC disclosing that the United States Patent and Trademark Office granted the 371 patent for Orexigen's fat-fighting pill Contrave, based on an interim data analysis for the ongoing cardiovascular outcomes trial dubbed the "Light Study".
The patent makes a rather surprising, and perhaps unprecedented, claim for an obesity drug: that Contrave actually has a positive impact on cardiovascular outcomes unrelated to weight change.
So what: Obesity drugs in the past have been plagued by severe adverse effects, especially when it comes to heart-related issues. Given that this patent is saying the exact opposite, Contrave could end up enjoying a near monopoly in the FDA-approved weight-loss drug market, and doctors might possibly begin to prescribe the drug off-label for heart issues.
That said, it is important to remember that Contrave's current package insert does explicitly state that the drug's effect on cardiovascular mortality has not been established, and this patent in no way impacts its current regulatory status with the FDA.
Now what: Contrave's competitors -- Arena Pharmaceuticals' Belviq and VIVUS's Qsymia -- haven't been able to quiet the critics regarding their safety profiles, leading to poor sales and regulatory roadblocks in the EU. Orexigen, and its marketing partner Takeda Pharmaceuticals, could now have an absolutely game-changing advantage on the commercialization front, perhaps causing sales of its two chief competitors to nosedive in the near-future.
As it stands now, Contrave appears to have a real shot at becoming the first FDA-approved weight-loss pill to reach blockbuster status, especially if it can gain traction as an off-label treatment for patients at risk of heart attacks or strokes. Time will tell.