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In Line Loss at Orexigen in Q2

Zacks Equity Research

Orexigen Therapeutics, Inc. (OREX) reported a net loss of 19 cents per share in the second quarter of 2013, which compared favorably with the year-ago loss of 25 cents and was in line with the Zacks Consensus Estimate. Revenues remained flat year over year at $0.9 million, again in line with the Zacks Consensus Estimate.

Operating expenses increased to $19.1 million during the second quarter of 2013 from $17.6 million in second quarter 2012, primarily due to the increase in general and administrative (G&A) expenses. Research and development (R&D) expenses increased 2.1% from the year-ago period to $13.1 million primarily attributable to the costs related to its obesity candidate, Contrave. G&A expenses were up 27.1% to $6.0 million.

Along with the second quarter 2013 results Orexigen provided an update on Contrave. The company is planning to submit the marketing authorization application to the European Medicines Agency for Contrave in the next few months with a final decision on the approval expected in the fall of 2014.

The company received a complete response letter (CRL) from the U.S. Food and Drug Administration (:FDA) in Jan 2011 for Contrave. At the time of issuing the CRL, the FDA had expressed concerns regarding the long-term cardiovascular safety profile of Contrave and had asked Orexigen to conduct an additional study.

The company is conducting a randomized, double-blind, placebo-controlled, Light Study (n ~ 8,900) to asses the risk of major adverse cardiovascular events in overweight and obese subjects treated with Contrave. The study is being conducted under a Special Protocol Assessment with the FDA. The company plans to conduct an interim analysis and resubmit the marketing application later this year.

The company has a collaboration agreement with Takeda Pharmaceutical Company Limited (TKPYY) for the development and commercialization of Contrave in North America. Takeda has experience in the metabolic disorder market which should prove beneficial. Orexigen is looking for partnership in rest of the world.

However, we note that Contrave, once launched, will be a late entrant in the obesity market. Last year, two obesity drugs - Belviq and Qnexa - were approved.

Orexigen carries a Zacks Rank #3 (Hold). Companies which look attractive include Actelion Ltd. (ALIOF) and Jazz Pharmaceuticals (JAZZ). While Actelion carries a Zacks Rank #1 (Strong Buy), Jazz Pharma carry a Zacks Rank #2 (Buy).

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