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Orexigen (OREX) Q3 Loss Narrower Than Expected, Stock Up

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Orexigen Therapeutics, Inc reported net loss of $1.35 per share for the third quarter of 2017, which was narrower than the Zacks Consensus Estimate of a loss of $2.13. The company had reported earnings of $1.12 in the year-ago period mainly due to a non-cash settlement gain of $80.2 million, which was recorded as deferred revenues previously.

Quarterly revenues of approximately $18.9 million were significantly higher than $7 million in the year-ago quarter. The top-line improvement was primarily attributed to higher Contrave sales. 

Orexigen’s shares were up 8% in after-market trading on Nov 13, presumably on impressive Contrave sales. Year to date, the stock is up 1.1%, underperforming the industry’s gain of 1.5%.

Quarterly Details

In the third quarter, U.S. net sales of Contrave, Orexigen’s weight management drug, were $17.8 million. Product sales to global partners and milestone income amounted to $1.1 million.

IMS Health's prescription data recorded 208,397 total prescriptions for Contrave filled this quarter, an increase of 26% from the year-ago period.

R&D expenses increased 9.9% from the year-ago period to $5.8 million. General and administrative expenses were $30.4 million, down 13.5% from the year-ago period due to lower costs associated with commercializing Contrave in the United States.

Subsequent to the quarter, in November, the company signed an agreement with Merck KGaA for the commercialization of Contrave in Latin America including Brazil and Mexico. Merck KGaA will also be responsible for regulatory activities and will own marketing authorization in the region.

Meanwhile, the United States District Court for the District of Delaware’s favorable ruling in a paragraph IV litigation related to Contrave’s patents was a major relief for Orexigen. Actavis Laboratories, a subsidiary of Teva Pharmaceutical Industries Limited (TEVA - Free Report) , had filed an abbreviated new drug application seeking approval for the generic version of Contrave prior to the expiration of its U.S. patents. The ruling confirmed the exclusivity of Contrave through 2030.

2017 Outlook

The company tightened its net sales expectation in the United States to the range of $70 million to $80 million (previously $75 million to $85 million) as shipments from wholesalers have been consistently lower than prescription volumes. The company expects ex-U.S. sales to be in the range of $10 million to $15 million. The company expects its operating expense to be in the range of $185 million to $200 million. Cash balance at the end of the year is expected to be in the range of $40 million to $50 million.

Our Take

Orexigen achieved impressive sales growth for Contrave in the first nine months of 2017. With the U.S. District court ruling maintaining Contrave’s exclusivity through 2030 and Orexigen focused on entering into agreements for commercialization of Contrave in several geographies, we expect the drug to continue its performance going forward.

Orexigen has also adopted a targeted approach for ramping up Contrave sales after reacquisition of the U.S. rights last year. The company has benefited from this commercial strategy. We expect this strategy to continue to have a fruitful impact in the coming quarters.

Orexigen Therapeutics, Inc. Price, Consensus and EPS Surprise


Orexigen Therapeutics, Inc. Price, Consensus and EPS Surprise | Orexigen Therapeutics, Inc. Quote

Zacks Rank & Stocks to Consider

Orexigen carries a Zacks Rank #3 (Hold).

Sucampo Pharmaceuticals, Inc. is a better-ranked health care stock, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sucampo’s earnings per share estimates have increased from $1.01 to $1.11 for 2017 and from $1.06 to $1.21 for 2018 over the last 30 days. The company delivered positive earnings surprises in three of the trailing four quarters with an average beat of 15.63%.

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