Short Watch List (comments).
OREX (short)

Today news created a good opportunity for shorting of OREX.

"A Food and Drug Administration panel on Tuesday recommended approval for Orexigen Therapeutics Inc.'s weight loss drug Contrave, which mixes an antidepressant with an anti-addiction drug.

Some FDA scientists are concerned about Contrave's effects on the heart,and say it wasn't tried on enough elderly and at-risk patients. Also, results showed patients taking the drug lost 4.2 percent more weight than patients taking a placebo, and FDA guidelines say there should be at least a 5 percent difference for such drugs.

Study data showed a slight increase blood pressure and pulse rates for Contrave patients versus those given a placebo.

The advisers were not overly impressed with the modest weight loss seen in patients taking Contrave, but some said rejection could quash development of such drugs at a time when two out of three Americans are overweight or obese.

That is interesting... What they were thinking when rejected VVUS and ARNA? Now they are trying to save weakest obesity drug. Not good argument for FDA commissioners...

WHAT'S NEXT: The FDA is scheduled to make a decision on Contrave by Jan. 31."

Do you remember Meridia?

"Meridia was introduced to the U.S. Market in 1998 by Abbott Laboratories. It took more than 10 years for this obesity drug to reach $200M sales.
At the time of Meridia approval in 1997 the clinical evidence showed that about twice as many patients who took the medicine managed to lose at least 5 percent of their body weight vs. placebo. Increases in heart rate and blood pressure also were safety concerns with Meridia when it was approved, although the FDA then thought those adverse effects could be mitigated through monitoring.
But a recently completed analysis by the FDA of a large cardiovascular outcomes trial, known as SCOUT, showed that patients treated with Meridia did not achieve the expected cardiovascular benefit from losing weight, and instead, experienced a 16 percent higher rate of adverse cardiovascular events, such as heart attacks and strokes."

Do you think that FDA will repeat again same mistake and approve Contrave?

It's very high probability that FDA will send CRL and ask about special cardiovascular safety trial for Contrave.

Today AH OREX pps spike 12.42 Up 7.55 (+155.03%) was generated by short covering. Short Interest (% of float as of 11/15/10) 20.4%. It's already a giant profit for all OREX holders and they will want it in cash tomorrow. It's too risky to keep OREX through PDUFA. FDA likes to send CRL, especially for obesity drugs. I think that OREX pps must be at $9-10 range (or may be even less) before PDUFA.

Disclosure: I'll short OREX tomorrow at highest level. Low risk, medium reward.

January 07, 2011 by BiotechInvest

OREX is close to FDA PDUFA, so it creates a very good opportunity to play short game. FDA already sent CRL for 2 obesity drugs (VVUS and ARNA), so they must do it for Contrave. Contrave is weak drug, no strong side effects but it need additional trial to prove an efficacy.

Fear factor of FDA CRL will be much stronger to PDUFA date i.e. January 31th. It seems like that already today OREX is starting a drop. OK, let try it (I mean short OREX).

January 18, 2011 by BiotechInvest

Today OREX AH trades showed that fear factor is growing. February options prices are also very interesting for investors who not believing in "FDA miracle" i.e. the approval obesity drug Contrave without any CRL. I took today prices from TD (highest call and lowest put).

7.0 Put 0.55 0.70 (ask) 0.60 (last) -0.03 96 1,739

12.0 Call 0.70 0.85 (ask) 0.80 (last) 0.05 16 1,464

So, what upside and downside for OREX if approval or CRL? For example +80% (approval, even with some post study) and -60 % (CRL asking 2 years safety and efficacy). Up to $16 or down to $5.

I don't believe in approval so I buy 40 contracts of Feb. puts $7(ask $0.70) = $2,800
However, an approval has some probability (FDA is under the government pressure that US nation is in overweight danger, some FDA commissioners or their family members are obese and need this drug and etcetera). Any way this approval will drive OREX pps at least +80% (with short interest 15.69%). So, 14 contracts of 12 calls
as a insurance (ask $0.85) = $1,190. Altogether cost $3,990

CRL: pps $5  $1.30X4,000 =$5,200-$3,990(cost) = +$1,210 (+30%)

approval: pps $16  $3.15X1,400 = $4,410 - $3,990(cost) = +$420 (+10%)

Of course, pps $15 will already result in some losses (-$980), pps $6 will give biggest losses.

However, pps $15 is very unlikely in case of approval: Contrave will take all obesity market already in 2011, because VVUS and ARNA are badly delayed.
CRL will crash OREX pps because no other late stage drug in OREX pipeline (if any). -60% drop (to $5) is very modest estimation.

Well, 40/14 ($7 put/$12 call) deal seems reasonable for me. I don't like to play options but in case of binary event as OREX may be it's a good idea.

Disclosure: I have short OREX position. 

January 28, 2011 by BiotechInvest

Sold Feb. puts/calls triangle with +30% gain (even before event). I have decided to go through PDUFA with 10k OREX short position. Risk is enough high but also reward. The probability of CRL is very high (especially after MNKD CRL). FDA should send OREX in line of obesity drug companies and after hard competition to name a winner: safest and most effective obesity drug. It seems like that ARNA finally needs animal study to prove that the cancer was rat-specific and link it to female rat physiology. So, another 12 months at least and then resubmission.... Forget about ARNA for 2 years.
VVUS situation is more complicate.

"The U.S. Food and Drug Administration asked Vivus to examine whether it can use existing databases to determine the risk of oral cleft in children whose mothers took topiramate to prevent migraines, the company said today in a statement. Vivus’s diet pill, Qnexa, combines topiramate with the appetite suppressant phentermine."

Completed studies of Qnexa included 15 births from women who had taken the medicine or topiramate, and no birth defects were reported, Vivus said."


Topiramate Label Warnings


Pregnant women who take an epilepsy drug that is also prescribed for migraines may increase the risk of their children having birth defects birth defects, abnormalities in physical or mental structure or function that are present at birth. They range from minor to seriously deforming or life-threatening. A major defect of some type occurs in approximately 3% of all births. , doctors warned yesterday.

Babies born to women who took topiramate during pregnancy were more likely to have cleft palates cleft palate, incomplete fusion of bones of the palate. The cleft may be confined to the soft palate at the back of the mouth; it may include the hard palate, or roof of the mouth; or it may extend through the gum and lip, producing a gap in the teeth and a cleft , cleft lips and genital abnormalities, a study found.

The findings build on previous research, which found that other anti-convulsant drugs are also linked to an increase in birth defects. Typically, 2-3% of babies are born with abnormalities, but among women taking epilepsy drugs, the figure is 4-8%. Birth defects were more common when women were receiving high doses of more than one drug.

The recommended total daily dose of TOPAMAX® as treatment for prophylaxis of migraine headache is 100 mg/day administered in two divided doses.

The recommended total daily dose of TOPAMAX® as adjunctive therapy in adults with partial seizures is 200-400 mg/day in two divided doses, and 400 mg/day in two divided doses as adjunctive treatment in adults with primary generalized tonic-clonic seizures.

Qnexa contains:

* Full strength formula: 15 mg of Phentermine IR and 92 mg of Topiramate CR

* Mid strength formula: 7.5 mg Phentermine IR and 46 mg Topiramate CR

* Low strength formula: 3.75 mg Phentermine IR and 23 mg Topiramate CR

VVUS needs statistics for 46 mg of Topiramate. So, almost same as for prophylaxis of migraine headache.
Since birth defects were observed only with high doses of Topiramate (200-400 mg/day) VVUS has a chance to get very good statistics for low doses (no any birth defects).

Well, if OREX short give me some gain I will use it to invest in VVUS.

February 01, 2011 by BiotechInvest

Cover OREX today, it's not in my lists for next 2-3 years. Will think about VVUS (need find some statistics about low doses of Topiramate and Topiramate PK in CR form.

Sorry for OREX longs losses. FDA commissioners are mostly scientists and they use science logic and knowledge in discussion about approval (sometimes, not always). I also use this tool in biotech investment, so sometimes (>70%) final verdict for company is same as FDA. I'll work to improve it.

February 04, 2011 by BiotechInvest

I see that I wasn't alone when I was playing against OREX approval. Just read this paper.

"I sold it because there was actually this heart condition (issue) ... I knew the FDA would be rough on heart risk," said Serge Depatie, portfolio manager at Natcan Investment Management in Montreal.

Depatie, who runs the $17 million Altamira Health Sciences Fund LP68000291, said he sold the stock in the $5 range, unwilling to risk money on a company without a deep pipeline of products to fall back on in case the FDA rejected the drug.

"The best analysts on the street have it wrong 50 percent of the time. The best analysts have far more PhD.'s than I do and much better networks than I do. I cover healthcare and other sectors and they cover five biotech companies. I mean, how can I beat them on the science," he said.

LOL! "wrong 50 percent of the time" it's actually good result, I see that some of them are wrong 60-70% of the time.

The clever guy if compare with other "big investors who might have lost millions on Orexigen were prominent hedge funds like Steven Cohen's SAC Capital Advisors, which controlled 3.4 million shares as of Jan. 28, according to the most recent regulatory filings with the U.S. Securities and Exchange Commission.

Big-name funds like Fidelity Investments, New Enterprise Associates (NEA), BNY Mellon Asset Management and the California Public Employees' Retirement System had money in Orexigen at the end of last year, according to SEC filings and data collected by Thomson Reuters."

I'm thinking about to send OREX in my Archive for next 2-3 years. This company has nothing in their pipeline, FDA asked them to do additional safety trial (may be very long one). The recent OREX pps bounce I qualified as an "investomadness" attack.

Who will be the winner in this obesity pills race? Read my VVUS comment here.


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