This Weeks Stock Pick
7-12-2010 STW
Recommendation
OREX - Strong Buy
While the road to FDA
approval will be full of bumps in pot holes we see this as a good time to
begin building a position. This week one of the other 2 competitive weight
loss drugs being considered by the FDA for approval is expected to get an
answer. If the VVUX drug is approved it bodes well for OREX. If the VVUS drug is not given
FDA approval it I also a good sign for OREX because the bottom line is with
over 35% of us now dealing with obesity, doctors need a good arsenal of meds
to help reverse this trend. It is becoming obvious that these drugs are
truly lifesavers.
Both drugs
used to form the OREX drug Contrave are FDA approved and being used today
for other conditions. So they already have met the FDA's safety standard.
The trial results for Contrave exceed the needed 5% body weight loss
effectiveness required for approval. While not as significant a weight loss
as the competitors Contrave seems to have milder side effects. The big plus
for Contrave is that the drugs it uses have other benefits and are often
used in smoking cessation programs, to treat depression and have shown
benefits to the blood sugar level of diabetics. These are all indications
associated with weight problems giving Contrave benefits its competitors do
not offer.
OREX is also
not a one trick pony. While they focus on obesity drugs and research they
have a second combination drug Empatic which also sows great promise in
trials. While approval is not expected for several years it looks like the
company will have 2 income producing drugs in the coming years.
Financially
the company has a much improved balance sheet due to moves they made in 2009
and while their cash burn rate is erratic it appears they will have the
funding to get through the FDA approval. They are also a buy out candidate
from major pharmaceuticals, though they do not currently plan or address on
any such actions.
The OREX
stock share price after absorbing significant erosion over the past10 months
appears to be reaching a bottom and has begun a short term uptrend. More
detail is available below in our technical analysis. Short Interest over 11%
also brings the possibility of a squeeze into play.
The STW
analyst has set a short term price target of $5.50 and sees long term price
appreciation above $20 on FDA approval. We recommend OREX as a Strong Buy.
Excerpts from OREX news and press releases
Orexigen
Data Grabs Investor Attention In Beaten-Down Stock
Monday 06/28/2010 12:54
PM ET - Dow Jones News
By Thomas Gryta
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Orexigen
Therapeutics Inc. (OREX)
presented data on its lead experimental weight-loss drug that grabbed the
attention of investors, sending the stock up as much as 16%, coming off its
lowest levels in 12 months.
The drug, Contrave, helped diabetes patients lose weight and control their
blood sugar better than a placebo, according to data presented late Friday
at the annual meeting of the American Diabetes Association. The findings
aren't especially surprising, but they are reminding investors that Contrave
is an effective drug with a large market potential.
"It seems like they are getting very modest credit for having an approvable
product," said Cowen & Co. analyst Phil Nadeau. He projects 2014 Contrave
sales of $375 million in the U.S., compared to Orexigen's market valuation
of $230 million.
The biopharmaceutical company is vying against Arena Pharmaceuticals Inc. (ARNA)
and Vivus Inc. (VVUS)
to develop a new obesity treatment, a huge and growing market in the U.S.
Nadeau expressed surprise that Orexigen's stock is moving so much on Monday.
The stock, recently up 13% to $4.69 on the day, is down 36% for the year,
compared to Arena, down 6.5%, and Vivus up 8%, for the year to date.
Rodman & Renshaw analyst Elemer Piros called the stock's move a "knee-jerk
reaction." He said Contrave's effectiveness in diabetes is consistent with
results seen in other obesity drugs and called the data from ADA
"incremental."
But Orexigen Chief Executive Michael Narachi believes investors have been
waiting to get back into the stock and that large institutions are buying
the stock Monday after seeing the data.
"They see us as a value play," he said in an interview.
The Food and Drug Administration is expected to make an approval decision by
January for Contrave and a panel will review the drug's application in
December, well after Vivus and Arena face their own panels in July and
September, respectively.
Narachi expects that many investors are watching to see how those panels
proceed, especially the Vivus panel. The companies, along with potential
partners at pharmaceutical companies, want to know if there are any general
issues that could impact the entire obesity-treatment space and to see what
level of post-approval commitment the agency is going to want, he said.
He doesn't believe that Orexigen faces a competitive disadvantage by being
the last drug to face a panel and the company continues to pursue a
partnership prior to the FDA's decision.
The Contrave study presented at ADA included overweight or obese patients
with type-2 diabetes. After a little more than a year, twice as many
patients taking Contrave lost at least 5% of their body weight than those
taking a placebo.
Those on the drug also had better glycemic control, as measured by their
levels of A1C, a type of hemoglobin used to determine glucose concentration
over time. Orexigen said 44% of Contrave patients reached the American
Diabetes Association treatment target for A1C of less than 7%.
Although Orexigen is seeking an approval for weight loss, Narachi expects
the diabetes data to be included on Contrave's label. That could help expand
the number of physicians that are willing to use the drug, including
endocrinologists that treat diabetes.
Adding to that, JMP Securities analyst Charles Duncan said earlier this
month that Contrave's proven benefit in diabetes could help boost the
overall argument for new weight loss drugs as a whole.
Because obesity increases the risk of other health problems, it isn't a
surprise that weight loss can help improve other aspects of patient health.
But Duncan believes the FDA will see proof of those correlations as positive
when making approval decisions.
-By Thomas Gryta, Dow Jones Newswires; 212-416-2169; thomas.gryta@dowjones.com
Orexigen(R) Therapeutics Announces That Contrave(R) Reduced Depression
Scores and Body Weight in Overweight and Obese Patients With Major
Depression
Saturday 06/26/2010
10:00 AM ET - Pr Newswire
Orexigen(R) Therapeutics, Inc. (Nasdaq:
OREX)
today announced results from a 24-week open-label study demonstrating that
treatment with Contrave(R) resulted in significant improvements in
depressive symptoms that was accompanied by weight loss and improved control
of eating in overweight and obese patients with major depression.
The primary endpoint of the study was the
change from baseline in the Montgomery-Asberg Depression Rating Scale (MADRS)
at 12 weeks on an intent-to-treat (ITT)
basis. Treatment with Contrave32 (32mg naltrexone sustained release (SR)/360mg
bupropion SR) resulted in the MADRS score decreasing from an average of 23.7
at baseline (consistent with moderate depression) to 10.5 (mild depression)
(p<0.001) at week 12 and further decreasing to 8.4 (remission) at week 24
(p<0.001). Patients who completed the study lost an average of 9.2% of total
body weight and reported substantial reductions in hunger, strength and
frequency of food cravings and demonstrated improved control of eating.
"Recent reports in the literature show
that the risk of depression is higher in obese people and, at the same time,
depression has been associated with increased obesity. In addition, obese
women are more than twice as likely to be depressed as non-obese women. In
this context, clinicians are in need of new tools to treat obese patients
suffering from this common co-morbidity," said Dr. Susan McElroy, M.D.,
Lindner Center of HOPE, Mason, Ohio. "This study is the first step in
assessing the value of Contrave in this important patient population and
these positive results should encourage additional investigation."
In this study, the most common adverse
events were nausea, constipation, headache and insomnia, and, in general,
were consistent with past experience in the COR program. There were no
serious adverse events reported by the investigator as related or possibly
related to Contrave in the trial.
About Contrave
Contrave is an investigational combination
therapy believed to address both physiological and behavioral drivers of
obesity. The two components of this combination therapy act in a
complementary manner in the central nervous system. The central pathways
targeted by this treatment are involved in controlling the balance of food
intake and metabolism, and regulating reward-based eating behavior. In
clinical trials, Contrave was shown to help obese patients initiate and
sustain significant weight loss, improve important markers of
cardiometabolic risk and increase ability to control eating.
The U.S. Food and Drug Administration (FDA)
has tentatively scheduled a Division of Metabolic and Endocrine Drug
Products Advisory Committee meeting on December 7, 2010 and the Prescription
Drug User Fee Act (PDUFA) action date has been set for January 31,
2011.
About the Contrave Clinical Development
Program
All four trials in the COR Phase 3 program
(COR-I, COR-II, COR-BMOD and COR-Diabetes) were randomized, double-blind,
placebo-controlled trials. The co-primary endpoints were the proportion of
patients achieving at least 5% weight loss and percent change in body weight
compared to placebo. Secondary endpoints included multiple measures of
cardiometabolic risk, quality of life, control of eating, and glycemic
control. Contrave was generally well tolerated. The safety and tolerability
profile of Contrave in the clinical development program was consistent with
the safety profile of the constituent components, which have been in use for
other indications for over 20 years. The most frequent treatment-emergent
adverse events in patients treated with Contrave were nausea, constipation,
headache, vomiting and dizziness. These were mostly mild to moderate in
severity, transient, and typically occurred during the first weeks of
treatment. Most common adverse events leading to discontinuation with
Contrave were nausea, headache, dizziness and vomiting. Treatment with
Contrave was not associated with increases in adverse event reports of
depression or suicidal ideation compared to placebo. Mean blood pressure
with Contrave was generally unchanged from baseline to endpoint. Placebo
patients experienced decreases in blood pressure from baseline to endpoint
of approximately 2mmHg. Greater weight loss correlated with greater
reductions in blood pressure in both Contrave and placebo patients,
suggesting that the expected relationship between weight loss and blood
pressure was maintained. Importantly, normal circadian blood pressure
patterns were preserved with Contrave. There was an increase in pulse of
about one beat per minute in patients taking Contrave. Serious events were
reported infrequently and included events of cholecystitis (Contrave 0.2%,
PBO <0.1%), seizure (<0.1%, 0%) and major cardiovascular events (<0.1%,
<0.1%).
Orexigen Therapeutics, Inc. (OREX)
Contrave(R) Obesity Research Phase 3 Program Meets Co-Primary and Key
Secondary Endpoints; Exceeds FDA Efficacy Benchmark for Obesity Treatments
2009-07-20, Source: Orexigen
Therapeutics, Inc.
 Orexigen(R)
Therapeutics, Inc. today announced that all three remaining Phase 3 trials
evaluating Contrave(R) (bupropion SR/naltrexone SR), its investigational
drug for the treatment of obesity, met their co-primary endpoints. The
results from the successfully completed Contrave Obesity Research, or COR,
program of more than 4,500 patients exceed the FDA categorical efficacy
benchmark for clinically significant weight loss, supporting the Company's
plan to file a New Drug Application (NDA) with the US Food and Drug
Administration (FDA) in the first half of 2010.
Key top-line data from the COR
Phase 3 program include the following:
"The successful completion of
the COR Phase 3 program is a major milestone for Orexigen, and the results
demonstrate the potential for Contrave to help patients in their battle
against obesity," said Mike Narachi, President and CEO of Orexigen. "These
results highlight the benefits of Contrave, a novel combination that was
specifically designed to address the behavior and reward pathways in the
brain that impact one's ability to initiate and sustain weight loss."
Company Background
Orexigen Therapeutics, Inc. (OREX:NASDAQ), is an emerging biopharmaceutical company focused on the development
of pharmaceutical product candidates for the treatment of obesity. Its
combination product candidates targeted for obesity are Contrave which has
completed Phase III clinical trials, and Empatic, which has completed Phase II clinical
trials. Contrave is a combination of two drugs, bupropion and naltrexone, in
a sustained release (SR) formulation. Bupropion is a prescribed
antidepressant and smoking cessation medication; naltrexone is a treatment
for alcohol and opioid addiction. Empatic is a combination of bupropion SR
and zonisamide SR. Zonisamide, in a release formulation, was approved in the
United States for the adjunctive
treatment of partial seizures, a form of epilepsy. These product candidates
regulate appetite and energy expenditure through the central nervous system
(CNS).
Contrave
Contrave is a fixed dose combination of
bupropion SR and naltrexone SR. Naltrexone was chosen as a complement to
bupropion in order to block compensating mechanisms. Naltrexone is marketed
under the brand names Trexan, Depade, ReVia, and in an injectable extended
release formulation, Vivitrol. Naltrexone works by blocking opioid receptors
in the brain and inhibits the reinforcing aspects of addictive substances.
Nausea is a side effect associated with naltrexone immediate release.
Bupropion is marketed for depression under the brand name Wellbutrin, and
for smoking cessation it is marketed under the brand name Zyban. Bupropion
is active at the neuronal uptake site for the neurotransmitters dopamine and
norepinephrine.
The Company conducted Phase II and Phase IIb
clinical trials for Contrave in 657 patients across 16 United States
centers. Contrave showed efficacy, as compared to each individual
monotherapy and placebo and an acceptable safety and tolerability profile to
warrant continued development in pivotal Phase III clinical trials. Its Phase III program for Contrave was comprised of four distinct clinical trials
that evaluated more than 4,500 patients. These four Phase
III clinical trials in the COR program were designed to assess three doses
of naltrexone SR (16mg, 32mg and 48mg) in combination with a 360mg dose of
bupropion SR.
Empatic
Empatic is a fixed dose combination of
bupropion SR and zonisamide SR. Zonisamide was approved for the treatment of
partial seizures, a form of epilepsy. It is marketed under the brand name
Zonegran by Eisai Inc. Zonisamide has a number of pharmacologic mechanisms,
including sodium-channel modulation and enhancement of dopamine and
serotonin neurotransmission. Zonisamide, given alone, has also shown weight
loss in prior clinical trials conducted at Duke University.
The Company conducted
initial Phase II proof-of-concept clinical trial for Empatic. Based on the
results that enrolled 127 patients across five United States centers, it
concluded that Empatic showed efficacy and an acceptable safety and
tolerability profile to warrant continued development. In June 2006, it
proceeded to study Empatic in a larger randomized, double-blind,
placebo-controlled Phase IIb clinical trial exploring several different
dosage combinations of bupropion and zonisamide in 623 patients with a body
mass index (BMI) between 30 and 43 across 15 United States centers.
Company Website
http://www.orexigen.com
Chart and Technical Analysis
Orexigen
Therapeutics Inc OREX:NASDAQ 
Bollinger Bands
OREX is trading within its Bollinger Bands. This is a normal condition and
suggests that the stock is neither overbought nor oversold, but the
tightening of the band does suggest a weak bullish signal.
Volume
The mederate volume increase over the past 2 weeks indicates accumulation
and is exerting upward price pressure.
MACD
OREX's MACD is indicating a weak bullish signal. Although the MACD is
trending above the signal line, the indicator is still below 0, when it
crosses above 0 it will become a strong bullish indicator.
Stochastics
The Stochastic Oscillator is registering a strong bullish signal as the %K
has crossed above the %D and the oscillator recently moved above the
critical value of 20 and OREX is no longer oversold.
On Balance Volume
The (OBV) On Balance Volume indicator shows that longer term selling
pressure has given way to near term accumulation. |
