Shares of Orexigen Therapeutics (NASDAQ:OREX), a biopharmaceutical company focused on treating obesity, surged by a whopping 44% in October, based on data from S&P Capital IQ, after one of its primary rivals received some bad news.
Zafgen (NASDAQ:ZFGN), which lost around two-thirds of its value last month, announced in mid-October that a patient in its bestPWS study involving beloranib had died of Prader-Willi Syndrome, or PWS. PWS is a genetic disorder that leads to life-threatening obesity; as of now there is no cure or effective treatment. The deceased patient was found to have been taking beloranib (there was some confusion for a day or two following the initial announcement concerning whether the patient had been on the placebo or not).
This death, combined with previously reported thromboembolic events in ongoing and prior studies, led the Food and Drug Administration to place a partial clinical hold on studies involving beloranib. The partial hold will allow Zafgen to continue its existing studies, but all patients will need to be screened for existing thrombotic disease prior to receiving more drugs in the ongoing study.
Beloranib is an exciting compound because, unlike the three weight control management drugs that were approved in recent years -- including Orexigen Therapeutics' Contrave -- it alters the production of fatty acids within the body rather than focusing solely on controlling hunger. However, with its safety in question, it potentially passes the torch back to Contrave and its peers as the go-to weight-loss alternatives.
Of course, Contrave is having struggles of its own. Orexigen and partner Takeda Pharmaceuticals were forced to scrap their long-term cardiovascular outcomes study earlier this year, which essentially took away the differentiating point of Contrave compared to its competitors Belviq and Qsymia. Another long-term cardiovascular study isn't expected to be completed until 2022.
Based on Orexigen's Q3 results (released last week), things are as murky as ever. Total prescriptions written rose, but revenue dipped, implying that heavy discounting is under way to sell Contrave. Considering its lack of differentiation from its peers and the likelihood of ongoing losses, I believe your best bet would be to stick to the sidelines for now.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.