Orexigen Therapeutics Reports Wider Q2 Loss as Costs Mount - Analyst Blog

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Orexigen Therapeutics, Inc. ( OREX ) reported a net loss of 21 cents per share in the second quarter of 2014, wider than the year-ago loss of 19 cents. The Zacks Consensus Estimate was earnings of 3 cents. Revenues remained flat year over year at $0.9 million.

Operating expenses increased to $23.7 million during the second quarter of 2014 from $19.1 million a year ago, primarily due to higher raw materials, inventory and manufacturing-related expenses and stock based compensation expenses.

Research and development (R&D) expenses increased 27.7% from the year-ago period to $16.7 million. General and administrative (G&A) expenses were up 15.1% to $6.9 million.

Pipeline Update

Orexigen's lead obesity candidate, NB32, is currently under regulatory review in both the U.S. and the EU. The FDA is expected to render a decision on NB32 by Sep 11, 2014, while a recommendation from the European Medicines Agency's Committee for Medicinal Products for Human Use is expected after the review of the Day 180 List of Questions. The company expects to submit its response to the Day 180 List of Questions in September.

We note that the company has a collaboration agreement with Takeda Pharmaceutical Company Limited ( TKPYY ) for the development and commercialization of NB32 in North America. Takeda has experience in the metabolic disorder market, which should be beneficial. The companies have started preparations for the launch of NB32 with approximately 900 sales representatives. Orexigen has rights to NB32 outside North America and is looking for a partner to commercialize NB32 in ex-North America territories.

Apart from NB32, Orexigen's pipeline includes another obesity candidate, Empatic (phase II completed). The company is looking for a partner to develop and commercialize the candidate, before initiating phase III studies.

Our Take

In the near term, we expect investor focus to remain on NB32. It is likely that NB32 will be approved both in the U.S. and EU given the positive data from the Light Study. This will also help Orexigen secure a lucrative partnership for NB32 in ex-North America in 2014.

Additionally, the company expects to receive milestone payments of $100 million from Takeda post approval but before the first commercial sale of NB32.

However, we note that NB32, once launched, will enter a highly crowded obesity market with products like VIVUS Inc.'s ( VVUS ) Qsymia among others.

Orexigen carries a Zacks Rank #5 (Strong Sell). A better-ranked healthcare stock, worth considering, include Alexion Pharmaceuticals, Inc. ( ALXN ) with a Zacks Rank #2 (Buy).



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ALXN , VVUS , OREX , TKPYY

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