The coming months will be entertaining in the obesity market with 3 companies fighting to get FDA approval.

The first one Vivus (VVUS), has just been slapped down by the FDA Advisory Committee with a 10-6 vote against approval for their drug Qnexa which has the best efficacy among the 3 competitors but certainly more side effects also. While we should consider that normal (the stronger a drug is and usually the most you suffer of secondary effects) the FDA would prefer a smoother efficacy with less side effects. The panel of Food and Drug Administration experts raised concerns over side effects including depression, memory and concentration lapses and heart-related issues. “This medication, in term of efficacy, is far superior than anything that’s on the market. The concerns we have are with safety,” said Dr. Abraham Thomas of Henry Ford Hospital in Detroit. Vivus shares have tumbled since as the FDA normally follows the advice of its expert panels, though it is not required.

The Second one, Arena Pharmaceuticals (ARNA) is developing the weight-loss drug lorcaserin, which seems poised to become a top competitor, the drug’s has more benign safety profile but is not completely free of side effects. An FDA panel is set to review lorcaserin in September 22th 2010.

The third one but in our opinion the most interesting one, Orexigen (OREX), both drugs used to form the OREX drug Contrave are FDA approved and being used today for other conditions. So they already have met the FDA’s safety standard. The trial results for Contrave exceed the needed 5% body weight loss effectiveness required for approval. While not as significant a weight loss as the competitors Contrave seems to have milder side effects. The big plus for Contrave is that the drugs it uses have other benefits and are often used in smoking cessation programs, to treat depression and have shown benefits to the blood sugar level of diabetics. These are all indications associated with weight problems giving Contrave benefits its competitors do not offer.

The Market for Obesity:

The National Institutes of Health reported in 2007 that about 65% of U.S. adults are overweight or obese. A 2009 publication in Health Affairs estimated the annual medical burden of obesity in the U.S. to be $147 billion in 2008. Studies have shown that weight loss of 5% to 10% is medically significant and results in meaningful improvements in cardiovascular risk factors and a significant reduction in the incidence of type 2 diabetes in patients with glucose intolerance.

The FDA Status:

The FDA draft guidance document “Developing Products for Weight Management,” dated February 2007, provides recommendations regarding the development of drugs for the indication of weight management. It contains two alternate efficacy benchmarks. The guidance provides that, in general, a product can be considered effective for weight management if after one year of treatment either of the following occurs: (1) the difference in mean weight loss between the active-product and placebo-treated groups is at least 5% and the difference is statistically significant, or (2) the proportion of subjects who lose greater than or equal to 5% of baseline body weight in the active-product group is at least 35%, is approximately double the proportion in the placebo-treated group, and the difference between groups is statistically significant.

All the 3 companies have released their pivotal Phase III result, all have shown efficacy and exceed the FDA recommendations.

Vivus has a PDUFA date of October 28th 2010.

Arena has a PDUFA date of October 22th 2010.

Orexigen has a PDUFA date in January 2011 with an FDA panel expected December 7th 2010.

About the 3 potential Drugs:

1 – Contrave® from Orexigen (naltrexone SR/bupropion SR) is an investigational medication for the treatment of obesity.

With its unique mechanism of action in the CNS, Contrave has the potential to change the way obesity is treated by:

* Initiating weight loss by reducing appetite and increasing metabolism
* Allowing the body to sustain continued weight loss by offsetting its natural tendency to fight back and slowing down the weight loss process
* Addressing the reward system in the brain that causes food cravings

Contrave is a combination of two well-established drugs, naltrexone and bupropion, in a sustained release formulation (SR).

* The active ingredients of Contrave have been used for over 20 years.
* Bupropion is a widely-prescribed antidepressant and smoking cessation medication; naltrexone is a treatment for alcohol and opioid addiction.
* We believe that bupropion helps initiate weight loss while naltrexone may sustain weight loss by preventing the body’s natural tendency to counteract efforts to lose weight.

2 – Qnexa® from Vivus is an investigational, once a day, proprietary, oral, controlled-release formulation of low dose phentermine and topiramate, which is believed to address both appetite and satiety – the two main mechanisms that impact eating behavior.

Phentermine was approved in 1959 and is currently indicated as short term treatment for weight reduction as an adjunct to exercise, behavior modification and caloric restriction.
Phentermine is currently the most widely prescribed weight loss therapy in the U.S.  Topiramate was first approved in 1996 as a treatment for epilepsy and more recently as a prophylactic for migraine.

Three pivotal phase 3 trials evaluating Qnexa in over 4,500 patients as a treatment for obesity were recently completed under a Special Protocol Assessment by the U.S. FDA. Qnexa is currently under review by the FDA for the treatment of obesity and is not approved.

EQUATE, the first of the three phase 3 studies, evaluated 756 obese patients over 28 weeks at 32 sites.  EQUIP and CONQUER were 56-week studies; EQUIP evaluated 1,267 morbidly obese patients with or without co-morbidities and CONQUER evaluated 2,487 overweight and obese patients with at least two co-morbid condition.

3 – Lorcaserin® from Arena Pharmaceuticals is a novel single agent that represents the first in a new class of selective serotonin 2C receptor agonists. The serotonin 2C receptor is expressed in the brain, including the hypothalamus, an area involved in the control of appetite and metabolism. Stimulation of this receptor is strongly associated with feeding behavior and satiety.

The lorcaserin Phase 3 pivotal program consists of the BLOOM (Behavioral modification and Lorcaserin for Overweight and Obesity Management) and BLOSSOM (Behavioral modification and LOrcaserin Second Study for Obesity Management) trials, which evaluated 7,190 patients for up to two years. In addition to the pivotal program, we are evaluating the safety and efficacy of lorcaserin for weight management in obese and overweight patients with type 2 diabetes in our Phase 3 BLOOM-DM (Behavioral modification and Lorcaserin for Overweight and Obesity Management in Diabetes Mellitus) trial. We plan to file the results of BLOOM-DM as a supplement to the NDA.

The pivotal program showed that lorcaserin consistently produced statistically significant weight loss with excellent tolerability. The BLOOM and BLOSSOM results were comparable, and demonstrated the following key lorcaserin effects after one year of treatment:

* About two-thirds of patients achieved at least 5% weight loss and over one-third achieved at least 10% weight loss;

* On average, patients lost 17 to 18 pounds or about 8% of their weight;

*  Secondary endpoints, including body composition, lipids, cardiovascular risk factors and glycemic parameters improved compared to placebo;

*  Heart rate and blood pressure went down;

*  Lorcaserin did not increase the risk of cardiac valvulopathy;

*  Lorcaserin improved quality of life, and there was no signal for depression or suicidal ideation;

*  The only adverse event that exceeded the placebo rate by 5% was generally mild or moderate, transient headache.

Post-hoc analyses of data from the individual pivotal trials also demonstrate lorcaserin’s efficacy:

*  Based on a normal BMI of 25, lorcaserin patients in the BLOOM trial lost an average of one-third of their excess body weight;

*  The top quartile of lorcaserin patients in the BLOSSOM trial lost an average of 16%, or 35 pounds, of their body weight.

Our Favorite play:

The recent safety concerns over Qnexa, coupled with more cautious expert panels could mean that none of Vivus or Arena potential weight loss drugs gain approval in 2010.

Our favorite play is Orexigen, while they focus on obesity drugs and research they have a second combination drug `Empatic` which also shows great promise in trials. While approval is not expected for several years for Empatic it looks like the company will have 2 income producing drugs in the coming years.

Their flagship Contrave has shown efficacy and while there are side effects also, it is the safest one among the 3 drugs. The drug, Contrave, helped diabetes patients lose weight and control their blood sugar better than the placebo group, according to data presented at the annual meeting of the American Diabetes Association. The findings aren’t especially surprising, but they are reminding investors that Contrave is an effective drug with a large market potential.

Financially the company has a much improved balance sheet due to moves they made in 2009 and while their cash burn rate is erratic it appears they will have the funding to get through the FDA approval. They are also a buy out candidate from major pharmaceuticals, though they do not currently plan or address on any such actions.

The OREX stock share price after absorbing significant erosion over the past10 months appears to be reaching a bottom and has begun a short term uptrend. Short Interest over 11% also brings the possibility of a squeeze into play.

The Food and Drug Administration is expected to make an approval decision by January for Contrave and a panel will review the drug’s application in December, well after Vivus and Arena face their own panels in July and September, respectively which is a huge advantage for them, being the last one you can learn from others.

Although Orexigen is seeking an approval for weight loss, we expects the diabetes data to be included on Contrave’s label. That could help expand the number of physicians that are willing to use the drug, including endocrinologists that treat diabetes.
Adding to that, JMP Securities analyst Charles Duncan said earlier this month that Contrave’s proven benefit in diabetes could help boost the overall argument for new weight loss drugs as a whole.
Because obesity increases the risk of other health problems, it isn’t a surprise that weight loss can help improve other aspects of patient health. But Duncan believes the FDA will see proof of those correlations as positive when making approval decisions.

Full Disclosure:

-Long position on OREX
-The Clever bull has not been compensated in any way by Orexigen to promote or write this article.

The Clever Bull team.

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About Eric: Eric is a 38 year old, French Canadian, IT engineer. Eric has been an active investor in many biotech companies for more than 15years. Well on his way and starting his own company which can be found at, www.klinkoomedia.com