Please ensure Javascript is enabled for purposes of website accessibility

Orexigen Falls Short

By Brian Orelli, PhD - Updated Apr 6, 2017 at 11:39PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Its obesity drug fails in the final mile of the drug-development marathon.

We often refer to drug development as a marathon because of the long road it takes to get a drug through clinical trials and the regulatory process. Orexigen (Nasdaq: OREX) seemed to be in a perfect position to win the race, having passed the obesity drug leaders -- VIVUS (Nasdaq: VVUS) and Arena Pharmaceuticals (Nasdaq: ARNA) -- and used their experience to gain positive Food and Drug Administration advisory panel results.

And then it bonked, a term marathoners use for hitting the wall. Down 70%, it's just sitting there paralyzed.

The FDA is requiring Orexigen to run a trial measuring cardiovascular events in patients taking its obesity drug, Contrave, before it can be approved. Investors were hoping that the agency would follow the FDA panel's 11-8 recommendation to allow the company to run the trial after the approval.

The FDA's move doesn't shock me. As I said when the FDA's experts voted, many seemed to want a pre-approval trial but didn't think that moving the goalposts on the company was fair. The FDA cares a lot more about safety than it does fairness.

How long are we talking? It's still too early to tell. Management needs to meet with the FDA to see exactly how large a trial should be and for how long the agency wants it to follow patients.

The Scout trial measuring cardiovascular events in patients taking Abbott Labs' (NYSE: ABT) Meridia took seven years to read out data. Of course, Meridia was already on the market, so Abbott had more to lose by completing the trial than by dragging it out. Presumably, Orexigen can do it in less time, but we're still talking years.

Orexigen's best move might be to climb on a stretcher and head home to start training for the next marathon. The drugmaker has a second-generation obesity drug called Empatic, which also contains bupropion, the active ingredient in GlaxoSmithKline's (NYSE: GSK) Wellbutrin and the suspected culprit for the potential heart issues in Contrave. Empatic appears to work better than Contrave in early trials, and if Orexigen is going to have to run outcomes studies for both drugs separately, it seems like a waste of money to run them on Contrave, only to have Empatic cannibalize sales fairly soon after approval.

I know Orexigen looks tempting at the beaten-down levels, but investors would be wise to wait until the company picks itself up off the pavement and tells investors exactly which path it plans to run down next.

Interested in keeping track of Orexigen as it makes a decision about what to do next? Click here to add it to My Watchlist, which will help you keep track of all our Foolish analysis on Orexigen.

GlaxoSmithKline is a Motley Fool Global Gains selection. The Fool owns shares of GlaxoSmithKline. Motley Fool Alpha owns shares of Abbott Laboratories. 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.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Abbott Laboratories Stock Quote
Abbott Laboratories
ABT
$112.03 (0.12%) $0.13
GSK Stock Quote
GSK
GSK
$35.26 (0.89%) $0.31
Arena Pharmaceuticals, Inc. Stock Quote
Arena Pharmaceuticals, Inc.
ARNA
VIVUS, Inc. Stock Quote
VIVUS, Inc.
VVUS

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
403%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.