Orexigen Therapeutics Inc. OREXQ

Canaccord Adam raising target to $19

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Orexigen Therapeutics, Inc. | Adam Cutler, 1.212.849.3907

OREX : NASDAQ : US$4.76 | US$224.8M | Buy , Target US$19.00 ?

•OREX shoots and scores; FDA panel gives Contrave a big fat yes

recommendation; reiterate BUY and raise price target to $19

Investment recommendation

We are reiterating our BUY rating on OREX. Yesterday, an FDA advisory

committee (ad com) voted 13-7 to recommend approval of OREX’s weight loss

drug Contrave. While the several weeks left before the Jan. 31 PDUFA date may

not leave enough time, we expect the FDA to approve Contrave sometime in

H1/11. Given the enormous market opportunity and OREX’s strong marketing

partner in Takeda, we think that Contrave will be a blockbuster. We are raising

our pNPV-based price target from $14 to $19 on increased odds of approval.

Investment highlights

• As expected, the panel focused mostly on the cardiovascular (CV) effects of

Contrave, with particular focus on blood pressure and heart rate.

• Highlights of the OREX team’s strong performance at the ad com included

comments on the bupropion patient population having high overlap in profile

with obese patients seeking therapy, a very well-articulated REMS and riskmitigation

strategy, and concise but very helpful comments about the possible

design for a post-approval CV outcomes study.

• Based on comments from the FDA, including asking for panel’s trust on

designing a good post-approval CV outcomes study, we think that FDA

is highly likely to approve Contrave.