Yesterday, the US Food and Drug Administration (FDA) ruled against an obesity treatment, effectively deciding the future of the market. The US Department of Health estimates that obesity causes 300,000 deaths a year. The FDA ordered that Orexigen Therapeutics Inc. (Nasdaq: OREX) to carry out a new safety study of its obesity drug, Contrave, sending the share down 73% to a market cap of $120 million.
Moshe (Mori) Arkin read the signs correctly. He owned more than 10% of Orexigen at its peak last summer, both personally and through Sphera Fund GP Ltd. He waited until the recommendation of the preliminary panel of FDA experts and sold his holding before waiting for the results. He saw the gap between the reasonable safety and efficacy characteristics of Contrave and the FDA's strong reservations about obesity drugs.
"Orexigen's drug was excellent, but even a drug with a pure and shiny safety record has only a 50% chance of approval by the FDA," Sphera partner Ori Hershkovitz told "Globes", even before the FDA rejected Contrave. "After several drugs were taken off the shelves this year due to side effects, including Meridia, made by Abbott Laboratories Inc. (NYSE: ABT), the FDA has gone to extremes."
There is a reason why obesity treatments are known as the "FDA graveyard". Two other companies, Arena Pharmaceuticals Inc. (Nasdaq: ARNA) and Vivus Inc. (Nasdaq: VVUS), reached the critical stage last year, and even presented a promising safety and efficacy profile, which would have been considered reasonable in other fields, but were sent to carry out new and expensive trials, which are liable to take years.
Published by Globes [online], Israel business news - www.globes-online.com - on February 2, 2011
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