Orexigen Therapeutics, Inc. (OREX) reported breakeven results in the fourth quarter of 2014. The Zacks Consensus Estimate was earnings of 3 cents. The company had incurred a loss of 21 cents per share in the year-ago quarter.
The bottom line was boosted by higher revenues during the quarter. Orexigen recorded revenues of $22.9 million as compared to $0.9 million in the year-ago quarter. The company received collaborative agreement revenues during the quarter related to the U.S. launch of Contrave. Revenues during the quarter were in line with the Zacks Consensus Estimate.
Orexigen incurred a 2014 loss of 32 cents per share, wider than the Zacks Consensus Estimate loss by a penny but narrower than the year-ago loss of 80 cents per share. The company’s 2014 revenues came in at $55.5 million compared with $3.4 million in 2013. Revenues fell slightly short of the Zacks Consensus Estimate of $56 million.
Quarterly Details
According to Takeda Pharmaceutical Company Ltd (TKPYY), U.S. net sales of Contrave in the fourth quarter came in at $6.5 million after the drug was launched on Oct 20, 2014. Orexigen received $1.3 million as royalties on net sales of Contrave.
Contrave was approved in the U.S. as an adjunct to a healthy diet (low on calories) and physical activity for chronic weight management in obese (Body Mass Index, or BMI, ≥ 30) or overweight (BMI ≥ 27) adults suffering from at least one weight-related co-morbid condition including high blood pressure, type II diabetes and high cholesterol.
Regarding the Marketing Authorisation Application for Mysimba (EU trade name for Contrave), in Dec 2014 , the company received a positive nod from the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) on the approval of the drug. A final decision on the approval of the drug in the EU is expected next month.
Operating expenses decreased 5.7% year over year to $20.6 million during the fourth quarter of 2014 primarily due to lower research and development (R&D) expenses related to Contrave. R&D expenses decreased 16.2% from the year-ago period to $13.0 million. General and administrative expenses were up 19.8% to $7.6 million.
Our Take
Orexigen’s fourth quarter results were disappointing with breakeven earnings missing our estimates. However, we are encouraged by the initial sales of Contrave. Moreover, the positive CHMP opinion enhanced the chances of the EU approval of Mysimba. We expect investor focus to stay on the performance of the drug going forward.
We note that the obesity market is already crowded with products like Qsymia and Belviq among others.
Orexigen carries a Zacks Rank #3 (Hold). Some better-ranked health care stocks include Affymetrix Inc. (AFFX) and BioMarin Pharmaceutical Inc. (BMRN). Both stocks sport a Zacks Rank #1 (Strong Buy).
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