Orexigen Therapeutics (NASDAQ:OREX) has been the darling of the obesity drugmakers, doing something Arena Pharmaceuticals (NASDAQ:ARNA) and VIVUS (NASDAQ:VVUS) weren't able to do: keep its share price above where it was when its weight-loss drug was approved in September.
Part of the superior returns have been due to the stronger launch of Contrave compared to Arena's Belviq and VIVUS' Qsymia, but the returns were certainly juiced by the spike in early March when Orexigen disclosed the first interim look at its Light study testing Contrave's effect on cardiovascular outcomes. The disclosure, which came as part of Orexigen announcing a patent to lower cardiovascular risk, showed that Contrave reduced the likelihood of adverse cardiovascular events by 41% compared to placebo at the first interim look at the data after 25% of the cardiovascular events required to end the trial were recorded.
Turns out the "Light" at the end of the tunnel was an oncoming train ready to derail the stock, dropping it well below its post-approval price.
Tuesday, Orexigen and its marketing partner announced that they were ending the Light study. That wasn't all that surprising because the companies had previously announced that the study wouldn't satisfy the FDA's post-marketing requirements, and they've already been planning a new cardiovascular outcomes trial.
What sent Orexigen down was the actual data from the trial. The second interim look after 50% of the events showed just a 12% difference between patients taking Contrave and those on placebo, which wasn't statistically significant.
As I warned when the data from the first interim look was released, when working with a small number of events -- 35 vs. 59 at the first interim look -- it's possible that the difference happened by chance alone. We see it all the time in biotech when stellar phase 2 data doesn't pan out in a larger phase 3 trial.
It gets worse
Not only does Orexigen not have solid data that shows Contrave lowers cardiovascular risk, but its partner, Takeda, now wants Orexigen to pick up the tab for the cardiovascular outcomes trial the FDA is making the companies run as part of its post-marketing requirements.
As part of the partnership established in 2010, Orexigen and Takeda were supposed to share the cost of safety trials, but Takeda now wants Orexigen to pick up the entire cost of the new cardiovascular outcomes trial with an estimated price tag of $150 million to $200 million.
Orexigen didn't disclose the exact reason for Takeda's claims of material breach of contract, but from public statements by the FDA, we know that the agency wouldn't allow the Light study to satisfy the post-marketing requirement because Orexigen's management shared the interim results with more people at the company than the FDA considered necessary. It seems Takeda thinks it's Orexigen's fault they have to run another trial, and wants Orexigen to pay for its mistake.
The two companies will battle it out in front of an arbiter unless they can come to a compromise themselves. Orexigen says Takeda's claims are "without merit," but my guess is Orexigen will have to pick up a little more of the cost of the trial. Fortunately, with the Light study ending early, Orexigen can argue that some of Takeda's "savings" from not having to pay for the Light study can be added to the new trial, so Orexigen shareholders have some hope that an arbiter won't make Orexigen pay the full cost of the new trial.