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    Stock Alert for Orexigen Therapeutics Inc. (OREX)

    Orexigen Therapeutics Inc. (OREX) is a biopharmaceutical company focused on the development of pharmaceutical product candidates for the treatment of obesity. Its lead combination product candidates targeted for obesity are Contrave (bupropion SR/naltrexone SR), which has completed Phase III clinical trials, and Empatic (zonisamide SR/bupropion SR), which has completed Phase II of clinical development.

    Share Statistics (21-Sept-11)

      FY2009 FY2010 % Chg Q22010 Q22011 % Chg
    Symbol OREX Revenue, $Mn 0.09 1.23 1266.7% 0.02 0.86 4200.0%
    Current price $2.18 Gross marg. 100.0% 100.0% 0.0% 100.0% 100.0%
    52wk Range: $1.22-$11.15 Oper. margin -4175.1% -872.6%
    Avg Vol (3m): 491,857 Net margin -73956% -4220.3% -94.3% -59500% -880.2% -98.5%
    Market Cap. 104.72M
    Shares Outstanding 48.08M EPS, $ -1.67 -1.10 -34.1% -0.25 -0.16 -36.0%

    Source: Reuters.com, SEC Filings

    Investment Highlights

    Shares of OREX have gained 58.2% in the last five days and 65.4% in the last month.  Year to date, the stock is down 63.2%.

    Shares of the San Diego-based drug developer jumped as much as 82% on Wednesday, a day after the company revived its obesity pill previously rejected by the FDA.

    OREX on Tuesday announced that following a recent meeting with senior officials in the FDA’s Office of New Drugs (OND), the Company received a written correspondence detailing the OND’s design requirements for a cardiovascular outcomes trial (CVOT) for Contrave that would address the Complete Response Letter (CRL) received in January 2011. The Company believes that these design requirements are reasonable and feasible and provide the certainty required to reinitiate development of Contrave.

    In a press release on Tuesday, OREX quoted the drug regulator as saying that if “if the interim analysis meets the specified criteria to exclude an unacceptable increased cardiovascular (CV) risk, the drug could be approved.” Furthermore, FDA stated that “While we still plan to convene a public advisory committee meeting to discuss topics related to obesity drug development early next year, that meeting will not impact on the advice provided in this letter and the agency will honor the advice provided.”

    Based on the new feedback from the FDA outlining a clear and feasible path forward for Contrave, OREX has outlined three near-term priorities for the program: finalizing the trial protocol with the agency; re-engaging with parties that expressed interest in partnering the ex-North American markets for Contrave; and implementing the CVOT as soon as it is able.

    The Company estimates that the entire study would require less than 10,000 patients and less than two years from study start to the interim analysis. The Company plans to meet with the review division to finalize a protocol with the objective of initiating the CVOT in the first half of 2012, with potential approval in 2014.

    Source:

    http://ir.orexigen.com/phoenix.zhtml?c=207034&p=irol-newsArticle&ID=1608571&highlight=

    Financial Summary

    For the three months ended June 30, 2011, OREX reported a net loss of $7.6 million, or $0.16 per share, for the second quarter of 2011, as compared to a net loss of $11.9 million, or $0.25 per share, for the second quarter of 2010. As of June 30, 2011, the Company had $36.4 million in cash and cash equivalents and an additional $33.3 million in marketable securities, for a total of approximately $69.7 million.

    Total operating expenses for the second quarter of 2011 were $8.3 million compared to $11.8 million for second quarter of 2010. This decrease in operating expenses primarily reflects a decrease in research and development expenses of $2.5 million principally related to the decrease in expenses related to its Contrave development program, salaries and personnel related costs and stock-based compensation expense. This overall decrease in operating expenses also reflects a decrease in general and administrative costs of $1.0 million principally related to decreases in medical affairs expense and market research costs.

    During the quarter, after the Company’s meeting with FDA to discuss the Complete Response Letter received, the Company decided to further reduce cash expenditure through an additional reduction in force, resulting in certain one-time charges of $1.4 million that were recorded in the second quarter of 2011.

    Source:

    http://ir.orexigen.com/phoenix.zhtml?c=207034&p=irol-newsArticle&ID=1594354&highlight=

    Financial Strength (21-Sept-2011)

    Company

    Industry

    Sector

    S&P 500

    Quick Ratio (MRQ) 1.85 1.78 0.77
    Current Ratio (MRQ) 7.69 2.22 2.18 1.13
    LT Debt to Equity (MRQ) 0.00 12.31 22.83 109.95
    Total Debt to Equity (MRQ) 1.08 14.23 28.94 147.40
    Interest Coverage (TTM) -69.71 0.09 1.64 23.42

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    Analyst Recommendations and Revisions

    1-5 Linear Scale

    Current

    1 Month
    Ago

    2 Month
    Ago

    3 Month
    Ago

    (1) BUY 0 0 0 0
    (2) OUTPERFORM 0 0 0 0
    (3) HOLD 6 6 6 6
    (4) UNDERPERFORM 0 0 0 0
    (5) SELL 0 0 0 0
    No Opinion 0 0 0 0
    Mean Rating 3.00 3.00 3.00 3.00

    Source: http://www.reuters.com/finance/stocks/analyst?symbol=OREX.OQ

    Consensus Estimates Analysis

    # of Estimates

    Mean

    High

    Low

    1 Year Ago

    SALES (in millions)
    Quarter Ending Sep-11 6 0.80 1.30 0.03
    Quarter Ending Dec-11 6 0.64 1.30 -0.12
    Year Ending Dec-11 5 4.35 5.30 3.42 52.57
    Year Ending Dec-12 6 3.48 6.30 0.10 77.26
    EARNINGS (per share)
    Quarter Ending Sep-11 6 -0.16 -0.12 -0.26
    Quarter Ending Dec-11 6 -0.15 -0.06 -0.26
    Year Ending Dec-11 6 -0.74 -0.62 -1.02 -0.51
    Year Ending Dec-12 6 -0.72 -0.54 -1.31 -0.57

    Technical Analysis

    Source: http://stockcharts.com

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Sept21-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Roche Holding AG RHHBY 39.06 33.13B 10.79 9.46 0.67 0.64
    GlaxoSmithKline plc GSK 41.73 106.62B 11.28 10.46 2.47 2.36
    Abbott Laboratories ABT 52.45 81.64B 11.30 10.51 2.10 2.01
    Arena Pharmaceuticals Inc. ARNA 1.57 229.32M n/a n/a 16.71 6.72
    Drug Manufacturers – Other Median       19.10 n/a 4.48 n/a
    Orexigen Therapeutics Inc. OREX 2.17 104.34M n/a n/a 23.99 29.98

    Source: Thomson Financial

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