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The next time Orexigen had important clinical trial results to report to investors, the news was bundled together in a positive, detailed press release that anticipated a lot of investor questions. The conclusion was that all three studies reached their primary goals, and the data was good enough to submit an application to the FDA for approval in the first half of 2010.
The stock shot up 27 percent the following day to $7.20. Demand for the shares continued to surge, even after Orexigen issued 10 million new shares to raise capital—a move that usually dilutes the value of existing shares. By the end of July, the company had pocketed $81.6 million—more than doubling the amount of cash it had in the bank. Even with the extra supply of shares, the stock’s value has held up, closing yesterday at $7.81.
Besides bringing in Narachi, Orexigen has added a lot more management depth. It hired Jay Hagen from Amgen to be its dealmaker. It recruited Mark Booth from Takeda Pharmaceuticals North America—who has experience marketing three billion-dollar molecules, to plot the future commercial strategy for Orexigen. Michael Scaife, formerly of Chiron and Novartis, was brought in to spearhead regulatory affairs, which will be important as the company seeks FDA approval.
So that’s a good six months in anybody’s book. But where is Orexigen heading in what could be an increasingly competitive market for obesity drugs with San Diego-based Arena Pharmaceuticals and Mountain View, CA-based Vivus?
To hear Narachi tell the story, Orexigen is going to position its drug as a pharmaceutical option for really obese people trying to head off serious medical problems—not diet fad-of-the-month types who want to pop a pill to drop 10 pounds.
The way Narachi looks at the market, he sees the standard diet and exercise regimen as the starting point for most people. On the far end of the spectrum, representing more effectiveness, and more risk, is bariatric surgery. There’s not much for patients in the middle, who aren’t helped by diet and exercise, yet who face a high risk for diabetes, high cholesterol, high blood pressure, kidney disease, depression and a total of about 60 diseases, he says.
The Orexigen drug, and competing obesity drugs, are increasingly going to be evaluated not just on how many pounds they can help people shed, how safe they are, and whether people can keep the weight off, Narachi says. They are also being evaluated on these other high-risk diseases, the “co-morbidities” of obesity, which everyone agrees can cost the healthcare system a fortune. In short, these obesity drugs are not about winning beauty contests.
Especially given the prevailing political wind for reform, payers with limited budgets in the future might give a little extra scrutiny to brand-name obesity drugs that can potentially cost a lot when taken by millions of people.
If payers decide to get serious about forcing people into wellness programs … Next Page »
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