Orexigen Plunges as FDA Requests More Diet Pill Data

(Corrects spokeswoman name spelling in 12th paragraph.)

Orexigen Therapeutics Inc. plunged as much as 73 percent after U.S. regulators said the company must submit more data before its diet pill Contrave may be cleared for sale. Diet-drug developer Vivus Inc. also fell.

The Food and Drug Administration asked for a study on the cardiovascular risks of Contrave, which would be Orexigen’s first marketed product, the La Jolla, California-based company said today. The drugmaker will need to raise more money to fund the examination, Chief Executive Officer Michael Narachi said in a conference call.

Orexigen and partner Takeda Pharmaceutical Co. have been competing with Vivus and Arena Pharmaceuticals Inc. to introduce the first new prescription diet pill in the U.S. in more than a decade. While Contrave was initially last in line for approval, the FDA has also requested more information about the other two products, delaying them by a year or more.

“These days it seems that a lot of drugs are guilty until proven innocent,” said Corey Davis, a Jefferies & Co. analyst in New York, in an e-mail. “It’s hard to imagine a clinical study that could satisfy the FDA that would cost less than $100 million and take less than six years to complete.”

Outside FDA advisers voted 13-7 on Dec. 7 that the weight- loss benefits of Contrave exceeded potential dangers of elevated pulse and blood pressure and that a large heart-risk study could wait until after drug approval.

Shares Fall

Orexigen fell $6.54, to $2.55 at 12:02 p.m. in Nasdaq Stock Market composite trading after declining to $2.50 for its biggest drop since April 26, 2007. Yesterday, it jumped 77 cents, or 9.3 percent, to $9.09, the biggest increase since Dec. 8. Before today, the shares gained 42 percent in 12 months.

Vivus dropped $1.47, or 16 percent, to $7.48 after the Mountain View, California-based company had risen 3.7 percent in the year before today. Arena, based in San Diego, gained 6 cents, or 3.8 percent, to $1.64. It had lost 52 percent in the past year.

The FDA’s letter to Orexigen, received yesterday, was specific to Contrave and doesn’t suggest the agency’s position on other diet-drug candidates, Narachi said on the call. The company will meet with the FDA to determine the scope of any new trial, he said.

It’s too soon to know the potential length or cost of the study or whether Orexigen may take other steps, such as appealing the decision to the FDA or dropping development of Contrave, he said.

‘Extremely Disappointed’

“We are surprised and extremely disappointed with the agency’s request in light of” the advisory committee’s stance, he said on the call. “We plan to work closely with the agency to gain more information to determine the appropriate next steps.”

Orexigen held $102 million in cash and short-term investments as of Sept. 30, according to data compiled by Bloomberg. Its partnership with Takeda requires it to fund all preapproval studies, Narichi said. While Takeda has the right to walk away from the deal, the two companies are “working closely together,” the CEO said.

Jocelyn Gerst, a Takeda spokeswoman, said it was “premature to speculate around the details of next steps” regarding the FDA’s letter. “Our focus is now to work closely with Orexigen and the FDA to clarify these next steps and move the process forward,” she said in an e-mail.

Takeda rose 45 yen, or 1.1 percent, to 3,995 yen in Tokyo stock market trading. The Osaka, Japan-based company has lost 1.2 percent in the past year.

‘Multiyear Delay’

The study will probably cost as much as $200 million and lead to a “multiyear delay” in Contrave’s approval, said Phil Nadeau, a Cowen & Co. analyst, in a note to clients today. He said he based the estimate on Orexigen’s comment that the FDA wanted a trial of “sufficient size and duration” to show the drug’s benefits outweigh the heart risks.

“As there is a chance that the trial might not succeed in satisfying the FDA’s concerns, a reasonable alternative would be for Orexigen to suspend development, and return cash to shareholders,” Nadeau said.

About 68 percent of American adults are overweight, raising their risk of diabetes, heart disease, high blood pressure and cancer, according to a 2008 National Health and Nutrition Examination Survey. Almost 34 percent are obese, measured as a ratio between height and weight.

Abbott Drug

Xenical, from Basel, Switzerland-based Roche Holding AG, was approved in 1999 and is the only long-term medicine for weight loss since Abbott Park, Illinois-based Abbott Laboratories’ Meridia was pulled off the market in October because of heart risks.

Abbott’s experience should have been a warning to the company and analysts, said Erik Gordon, an assistant business professor at the University of Michigan in Ann Arbor, who studies the biotechnology industry.

“After the Meridia experience, if you show up with a drug whose data indicates a risk of serious side effects, you can’t be surprised that the FDA wants the kind of study it routinely requires to get a handle on the prevalence of potentially deadly risk,” Gordon said in an e-mail. “The FDA has been beat over the head enough for approving drugs with some efficacy and serious risks.”

Contrave is a combination of two approved drugs that target different parts of the brain influencing appetite and cravings. The pill contains bupropion, an antidepressant also used to quit smoking, and naltrexone, a treatment for alcohol and painkiller addiction.

Contrave Results

Two tablets of Contrave a couple times a day helped twice as many patients in studies lose at least 5 percent of their weight compared with a placebo after 56 weeks. Patients on the drug also had a higher pulse rate and higher blood pressure than those on placebo, even after losing weight.

If approved, Orexigen’s revenue from royalties on Contrave is estimated to be $406.5 million in 2015, according to the average of two analysts surveyed by Bloomberg.

Joshua Schimmer, an analyst at Leerink Swann, said after the FDA panel meeting in December that he expected Contrave and Vivus’s Qnexa to ultimately win approval with potential sales of each reaching $1 billion or more in the U.S.

The FDA asked for more information about Qnexa in October. Vivus said Jan. 21 that the FDA may require an analysis of birth defects tied to one of the drug’s ingredients. Analysts said it make take months to quantify the risk and then another six months for the FDA to review the company’s response.

Arena’s lorcaserin, under development with Tokyo-based Eisai Co., was tied to tumors in rat studies and is the least effective of the three pills. The FDA turned down the drug in October and the companies said in December that they planned to resubmit their application by the end of 2011 with data from new studies on the potential cancer risks.

To contact the reporter on this story: Catherine Larkin in Washington at clarkin4@bloomberg.net.

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.

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