Orexigen Therapeutics, Inc - Aggressive Growth

Orexigen Therapeutics, Inc. (OREX) has 2 main products that continue to make their way through the FDA approval process. The company also recently entered a deal to commercialize a drug that netted it a $50 million upfront payment.

However, shares will be volatile and the estimates are still in the red, but there is a ton of upside for this Zacks #1 Rank (Strong Buy).

Company Description

Orexigen Therapeutics is a biopharmaceutical company that treats obesity. The company has 2 products in for FDA approval that target neurons to suppress appetite for sustained weight loss.

Turning the Corner

The Zacks Consensus Estimate for Orexigen has always been negative, since we started covering the company in 2007. However, the trend is clearly higher and the forecasts should be positive in the next couple years.

Because of the company does not have any products on the market just yet, this is truly a speculative investment.

Forecasts for 2010 are averaging a $1.12 loss, but that narrowed from $1.29 over the past 3 months. Next year's estimates are calling for a 43 cent loss, less than half of what the projection was 3 months ago.

Approval on Track

Part of the improving consensus trend is from a reduction in R&D expenses as the drugs move through the FDA approval process.

Currently Orexigen has filed an NDA with the Food and Drug Administration, which was accepted, for its main product, Contrave. Empatic, the second product just finished up its Phase II development.

On Sep 2, Orexigen entered and agreement with Takeda Pharmaceutical to commercialize Contrave. Orexigen received $50 million upfront and could receive over $1 billion after certain regulatory hurdles are overcome.

The Chart

Shares of OREX will certainly be volatile. Spike at the beginning of September was from the previously mentioned deal with Takeda. The surge a couple weeks late came after a competitors diet drug failed to pass a key vote by the FDA.

Some see that as an increased risk for Orexigen's drugs, but others see it as a chance for even greater market share.

Bill Wilton is the Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Growth Trader service
 
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