Thursday, June 19, 2014

Will Small Cap Obesity Stocks Orexigen Therapeutics (OREX) Gain Your Portfolio Some Weight? ARNA, ETRM & VVUS

Orexigen Therapeutics, Inc (NASDAQ: OREX), like Arena Pharmaceuticals, Inc (NASDAQ: ARNA), EnteroMedics Inc (NASDAQ: ETRM) and VIVUS, Inc (NASDAQ: VVUS), is a speculative small cap obesity drug stock that has the potential for coming up with the next big thing in the treatment of obesity that is increasingly a global problems. I should mention that we have recently added Orexigen Therapeutics to our SmallCap Network Elite Opportunity (SCN EO) portfolio as an extremely speculative biotech bet because its lead obesity drug candidate has the potential to be approved by September 11th of this year.

What is Orexigen Therapeutics, Inc?

Small cap obesity drug Orexigen Therapeutics is a biopharmaceutical company focused on the treatment of obesity whose lead product candidate is NB32 which is believed to reduce appetite, help control cravings, increase metabolism and improve control over eating behaviors. In previous clinical trials involving more than 4,500 people, NB32 has been shown to help people lose weight and keep it off for up to one year. In addition and in these studies, 53% of study participants taking NB32 and 21% of those taking placebo lost five percent or more of their body weight over the 12 month trial duration. Based on successful results of the Light Study, an ongoing cardiovascular outcomes trial, Orexigen Therapeutics's strategy for NB32 is to pursue approvals worldwide and pharmaceutical partnerships for global commercialization. The Company has submitted applications for marketing authorization in the United States and Europe, with potential approvals in 2014. If approved, North American partner Takeda Pharmaceuticals will commercialize NB32 in the United States. Orexigen Therapeutics's other product candidate, Empatic, has completed Phase 2 clinical trials as a second late-stage, investigational medication for weight loss.

As for potential obesity peers or performance benchmarks, Arena Pharmaceuticals, Inc is focused on commercializing BELVIQ as a monotherapy for chronic weight management and to explore its therapeutic potential in combination with other drugs and for other indications; EnteroMedics Inc has developed VBLOC® vagal blocking therapy, a first-in-class weight loss treatment for obesity and related co-morbidities that is delivered by a pacemaker-like device called the Maestro® Rechargeable System which is designed to control both hunger and fullness by blocking the primary nerve which regulates the digestive system; and VIVUS, Inc is a biopharmaceutical company developing innovative, next-generation therapies to address unmet needs in obesity, diabetes, sleep apnea and sexual health for US, European and other world markets.

What You Need to Know or Be Warned About Orexigen Therapeutics, Inc

Earlier in June, Orexigen Therapeutics announced that the FDA had extended its review of the resubmitted New Drug Application (NDA) for NB32 with the new Prescription Drug User Fee Act (PDUFA) action date being set for September 11, 2014. The FDA had indicated that the review extension is needed to reach agreement on the post-marketing obligation related to the previously agreed upon evaluation of cardiovascular (CV) outcomes for NB32. It should be noted that the FDA had refused to approve the drug in 2011, citing concerns about cardiovascular risk while the latest delay sent shares down as much as 20% in part due to the activities of options traders.

Nevertheless, the FDA approved the obesity drugs Qsymia from VIVUS, Inc and Arena Pharmaceuticals, Inc's Belviq even after both of those drugs were initially rejected. However, sales of both obesity drugs have been far below expectations due to limited insurance coverage and high out-of-pocket costs for patients.

That could be an issue for Orexigen Therapeutics because the company has only produced revenues of $3.43M (2013), $3.43M (2012), $4.40M (2011) and $1.23M (2010) for the past four years and net losses of $77.67M (2013), $90.09M (2012), $28.06M (2011) and $51.91M (2010). However, the company still ended March with $155.09M in cash and short term investments to cover $21.66M in current liabilities and $80.97M in long term debt – meaning it won't need to do an equity offering any time soon.  

Otherwise, it should be noted that according to, Orexigen Therapeutics has short interest of 21.48% – meaning it can easily make an outsized move in either direction.

Share Performance: Orexigen Therapeutics, Inc vs. ARNA, ETRM & VVUS

On Wednesday, small cap obesity drug Orexigen Therapeutics fell 0.32% to $6.25 (OREX has a 52 week trading range of $4.59 to $7.84 a share) for a market cap of $727.05 million plus the stock is up 9..5% since the start of the year, down 0.95% over the past year and up 55.5% over the past five years. Here is a look at the long term performance of Orexigen Therapeutics verses other obesity drug stocks like Arena Pharmaceuticals, Inc, EnteroMedics Inc and VIVUS, Inc:

As you can see from the above performance chart, obesity drug stocks ate a good way for investors to quickly cause their portfolios to either gain or loose weight.

Finally, here is a look at the technical charts for Orexigen Therapeutics, Arena Pharmaceuticals, Inc, EnteroMedics Inc and VIVUS, Inc:

The Bottom Line. Again, we view Orexigen Therapeutics as a speculative bet on an FDA approval as shares are bound to jump. However and even if there is an FDA approval, investors will want to be cautious given the performance of obesity stocks in general and their ability to actually produce revenue – despite how many people are now obese. 

SmallCap Network Elite Opportunity (SCN EO) has an open position in OREX. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.

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