JP Morgan Upgrades Orexigen Therapeutics to Overweight

Orexigen Therapeutics OREX was upgraded from Neutral to Overweight with a $10 price target by J.P. Morgan on Thursday following FDA approval of the drug Belviq (lorcaserin). Arena Pharmaceuticals ARNA scored a big hit this week after this decision to approve the obesity drug Belviq. Following this news Arena shares rose 30 percent, but this has caused banks like J.P. Morgan to monitor other pharmaceutical companies trying to treat obesity. J.P. Morgan analyst Cory Kasimov wrote that he believes Orexigen will in fact be the biggest winner from the obesity interest, despite the fact that its own Contrave drug is still a couple of years away from FDA approval. "We have been and continue to be confident in Contrave's (partnered with Takeda) ultimate approvability based on the drug's positive Phase 3 program and FDA AdCom (13-7 vote in favor of approval in Dec 2010)," Kasimov said. "We'd further remind investors that the company has a second unencumbered obesity asset in Empatic that has completed Phase 2b testing and could advance to Phase 3 if VVUS's Qnexa is approved. The bottom line is that we expect this valuation discrepancy to narrow over time, and as such, we would be buyers of OREX at current levels." The obesity field was shaken on Wednesday when Arena's Belviq drug received FDA approval. According to Medical News Today, Belviq "is the first prescription diet drug to receive US federal approval in over a decade. It works by activating the serotonin 2C receptor in the brain, an effect that may help the patient feel full after eating smaller amounts of food and thereby eat less." "The approval of this drug, used responsibly in combination with a healthy diet and lifestyle, provides a treatment option for Americans who are obese or are overweight and have at least one weight-related comorbid condition," Dr. Janet Woodcock, director of the Center for Drug Evaluation and Research at the FDA told the press. On Thursday afternoon, Orexigen Therapeutics traded at about $5.80, up roughly 19 percent. Arena Pharmaceuticals traded at about $10.20, down roughly 10.3 percent. Follow me @BCallwood.