Why are analysts still optimistic about Orexigen's stock after the Contrave imbroglio?
- Orexigen's Contrave (naltrexone/bupropion) has been hailed as the next big obesity drug, but the FDA required trials to make sure the drug did not increase risk of cardiovascular (CVD) death. The company prematurely released data from that trial suggesting marked heart benefits, but those were later shown to be false positives by 50% interim data that was released without permission by the Cleveland Clinic's Dr. Steven Nissen, who said the company had "misled" investors and patients.
- Although the stock dropped by 27% over a two-day stretch, many analysts (seven out of eight surveyed by Bloomberg) are still calling it a "buy."
- The ostensible heart benefits did disappear over the long term—but at the same time, the midway trial results did not show a worse CVD outcome.
Given the fact that 1/3 of people in the U.S. are obese, Orexigen has every right to be optimistic about Contrave, which has proven weight-loss results for patients in clinical trials.
In March, when investors thought there was a CVD benefit, the stock was up a whopping 47%, and then down almost 30% on news of no CVD benefit and implications of company malfeasance. Orexigen and its marketing partner Takeda are currently embroiled in a dispute over who should foot the $200 million for a new CVD outcomes trial.
The important thing should be the drug's overall efficacy, safety, and tolerability profile. Given that profile, analysts are forecasting a 59% to 239% increase in the price of the stock as Orexigen looks forward to robust sales—$322 million by 2018.
Orexigen closed at $5.01 on Thursday and opened at $4.95 on Friday morning.
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