Another Weight Loss Drug Gets Props from Wall Street
California-based Orexigen Therapeutics’s (NASDAQ:OREX) new weight-loss drug Contrave entered its final stage of clinical trials ahead schedule and garnered the attention of Credit Suisse, who is attempting to pick a winner from among the three new weight-loss pills set to hit markets soon.
Vivus (NASDAQ:VVUS) and Arena Pharmaceuticals (NASDAQ:ARNA) received FDA approval earlier this year, and are expected to launch their products in the next few months. Contrave is working to achieve federal approval by 2014.
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Credit Suisse began its coverage of Orexigen Thursday with an Outperform rating and a $13 target. Shares of Orexigen have gone up 200 percent over the last year, and the rating from Credit Suisse pushed the price up a further 16.7 percent to $5.73.
Analysts Lee Kalowski of Credit Suisse believes the stock represents an attractive “risk-reward profile.” The firm estimates that the three weight-loss drugs currently being developed will earn a combined sales of $3.5 billion annually by 2020, according to a research note.
“Yet, even with this substantial growth, many investors are still likely to be disappointed,” Kalowski said to Bloomberg, and pointed out that when $3.5 billion is “split across multiple products, this is insufficient to support even one mega-blockbuster.”
He believes Arena’s Belviq will fall short of the market’s expectations, giving the company an Underperform rating, because the drug may not generate enough revenue to justify the stock’s current valuation. is associated with only modest weight loss. Belviq is only associated with modest weight-loss, limiting potential sales.
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