2012-11-07 21:08:20 -

By Jake King

Orexigen Therapeutics (NASDAQ:OREX) will be releasing its third quarter earnings
report after the market's close Wednesday night, and with all of the hoopla
surrounding obesity drugs Qsymia and Belviq this week, the baby of the group is
getting little attention. So what exactly do Vivus' (NASDAQ:VVUS) and Arena
Pharmaceuticals' (NASDAQ:ARNA) earnings reports mean for Orexigen?

Well, not a whole lot, despite how the markets have reacted - OREX is down 14%
since Monday in sentiment with its larger competitors. Qsymia's slower-than-
expected launch and prescription trends, and some major upcoming DEA decisions
for Belviq, mean little in the near-term for Orexigen. And while Qsymia's sales
numbers generate some concerns about the actual size of the market for obesity
products, Orexigen has the advantage of watching its peers stumble   through the
painful launch process and can temper expectations accordingly. Already Arena
and Vivus are taking flack for inadequate sales forces, and with at least a year
before commercialization of its own product, Contrave, Orexigen can learn a lot
about how not to proceed.

How Contrave stacks up against its rivals and its market acceptance will be
revealed in large part by the ongoing Phase III Light Study. Safety means a lot
in the segment, followed closely by efficacy and price, and as more data becomes
available, the market can more accurately assess the drug's long-term potential.
Of course, that's if the drug makes it through the Light Study and FDA approval.
While Vivus and Arena will be ruled by sales and prescription trends, OREX is
reliant on developmental advances, namely discussions with the FDA as it moves
Contrave closer to approval. Right now the company is trying to expedite
Contrave's review process, and it appears that the FDA is interested in the
option, although what exactly that means has not been decided (read more here).
That's exactly what OREX shareholders will be most interested in during today's
conference call. Positive statements from management - or more importantly,
concrete information - has the potential to drive the stock considerably in the
near-term. Expect management to emphasize faster-than-expected trial enrollment
and touch on the FDA's discussion, but firm guidance is doubtful. Orexigen
initiated a healthy capital raise last month, which won't show up on 3Q
earnings, but management will nonetheless point out OREX's fortified cash
position. The increased capital, in fact, provides some downside cushion in the
event of a catastrophe with Contrave; cash, equivalents, and investments should
account for approximately half of OREX's $325M market capitalization.

While Vivus and Arena have entered the battleground of commercialization,
Orexigen sits on the sidelines and monitors the progress. It's not a bad place
to be in what seems like a more speculative space than analysts originally
anticipated.

Read this, and more, at PropThink.com.

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