Orexigen's Q1 Loss Narrower than Expected, Contrave Grows - Analyst Blog

Orexigen Therapeutics, Inc.OREX reported a loss of 14 cents per share in the first quarter of 2015, narrower than the Zacks Consensus Estimate of a loss of 16 cents and the year-ago loss of 23 cents. Higher revenues and lower operating expenses in the reported quarter led to the narrower loss.

Orexigen Therapeutics Inc. - Earnings Surprise | FindTheCompany

Total revenues in the quarter increased substantially (408.6%) year over year to $4.4 million, just above the Zacks Consensus Estimate of $4.3 million.

Quarterly Details

According to Takeda Pharmaceutical Company Ltd TKPYY , U.S. net sales of obesity drug, Contrave (EU trade name: Mysimba), in the first full quarter were $11.5 million following the launch of the drug in Oct 2014. Contrave recorded a 76.9% sequential increase in sales in the U.S.

Orexigen received $2.3 million as royalties on net sales of Contrave. The company also received collaborative agreement revenues of $2.1 million (up 140% year over year) during the quarter under its collaboration agreement with Takeda for Contrave in North America.

As per IMS data, Contrave total scrips jumped from 31,765 in January to 36,387 in February and 49,041 in March. Orexigen reported that the overall obesity drug market has grown 15% year over year, in terms of filled obesity drug prescriptions since the launch of Contrave.

During the quarter, Contrave gained approval in the EU.

Operating expenses decreased 17.4% year over year to $19.8 million during the first quarter of 2015 primarily due to lower research and development (R&D) expenses.

R&D expenses decreased 33.9% from the year-ago period to $11.2 million. This was primarily due to a decline in pre-launch expenses related to Contrave, which was partially offset by an increase in expenses in connection with the Light Study. General and administrative expenses were up 22.5% to $8.6 million, mainly due to an increase in market research costs, stock-based compensation expense, salaries and other personnel related costs.

Our Take

We are encouraged by Orexigen's first-quarter results with the company reporting a narrower- than-expected loss and a sequential increase in Contrave sales. Moreover, we are also encouraged by Contrave's approval in the EU. However, generic threat to the drug remains an overhang. We note that Actavis ACT is looking to gain approval for its generic version of the drug in the U.S.

The obesity market is already crowded with products like Qsymia, Saxenda and Belviq among others and competition is getting more intense with the entry of new products.

We expect investor focus to remain on the sales ramp of Contrave and updates related to the product.

Orexigen carries a Zacks Rank #2 (Buy). Actelion Ltd. ALIOF is also a favorably ranked stock in the health care sector carrying a Zacks Rank #1 (Strong 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 Nasdaq, Inc.

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

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