Vivus And Oreixigen Have Too Many Problems For Investors, RBC's Simeonidis Claims

RBC Capital Markets’ Simos Simeonidis downgraded the ratings for Orexigen Therapeutics, Inc OREX and VIVUS, Inc. VVUS from Outperform to Sector Perform, citing a bleak outlook for the obesity segment.

Analyst Simos Simeonidis mentioned that the outlook for both the US and the EU obesity markets was bleak and that the road for commercialization of obesity drugs in the EU was likely to be tough.

Orexigen Therapeutics

The price target for Orexigen has been reduced from $5.00 to $1.00. Simeonidis mentioned that Contrave was launched as the third oral obesity agent in the US and was backed by significant commercial effort from Orexigen’s North American partner Takeda.

The analyst noted that Contrave’s success so far is attributable to the massive marketing and aggressive discounting program by Takeda. However, in the second year of the partnership, Takeda is not obligated to spend a hefty amount or devote its valuable salesforce resources and this may restrict the performance of Contrave in the future.

Simeonidis expects Takeda to either completely walk away from its partnership with Orexigen or decrease its commitment thus making

Vivus

The price target for Vivus has been reduced from $4.00 to $1.00. Simeonidis expects Vivus to find it difficult to make inroads in the obesity market. Although the company’s product is the strongest anti-obesity agent, it is unable to provide adequate commercial support.

“The US Obesity market is currently not ready for obesity pharmacotherapies, as evidenced by the lack of reimbursement and lack of physician willingness to prescribe these new drugs,” the RBC Capital Markets report noted, while adding that “the FDA requirement to run a Cardiovascular Outcomes Trial (CVOT) remains an overhang for investors.”

The company’s financial position presents another question mark for investors. Simeonidis stated that the pullback of resources from Takeda will not only hurt Contrave and Orexigen, but the whole obesity segment.