Why Orexigen Therapeutics Inc. Shares Have Seen the "Light"

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Orexigen Therapeutics , a clinical-stage biopharmaceutical company focused on developing therapies to treat obesity, soared as much as 30% after releasing the interim analysis of a safety study measuring the effect of its experimental chronic weight management drug, Contrave, on patients' cardiovascular health.

So what: According to the press release, Orexigen's Light Study, which included close to 10,000 patients, "clearly achieved the goal set by the FDA." Based on this news, Orexigen plans to resubmit its new drug application for Contrave (it's been rejected once before) within the next few weeks and could receive an approval as early as June 2014.

Now what: This is big news in many ways even if it doesn't appear like it on the surface. Orexigen's Contrave was rejected by the Food and Drug Administration originally in January 2011 due to cardiovascular safety concerns that necessitated this enormous study. This initial snippet of study data demonstrates that Contrave poses no increased heart attack risk concerns or adverse side effects, which should certainly give it some extra push for an FDA approval.

Another factor worth considering here is that it's light years (pardon the pun) ahead of its peers Arena Pharmaceuticals with Belviq and VIVUS with Qsymia with regard to a possible European approval. VIVUS' Qsiva (as it's known in the EU) was rejected on safety concerns while Arena pulled Belviq following an advisory meeting that suggested similar safety concerns. With Orexigen having already undertaken a large safety study, it could be sitting in the driver's seat for an EU approval as well.

Clearly, the big question now is whether the drug will sell. Qsymia sales struggled out of the gate, primarily as insurers were unwilling to cover the drug for a couple of months and consumers were unwilling to pay for it out of their own pocket. Arena's Belviq has seen a slightly quicker sales ramp-up than Qsymia, largely due to its perceived more-favorable safety profile and the fact that it has a large marketing partner in Eisai, but even its results have been unimpressive. We've definitely learned with this sector that approval plays second fiddle to a successful drug launch, but Orexigen may now have the upper hand.

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The article Why Orexigen Therapeutics Inc. Shares Have Seen the "Light" originally appeared on Fool.com.

Fool contributor 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.Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

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