Recently we discussed an announcement made by Orexigen (OREX) bring heart benefits of their diet pill Contrave to the public. The story was simple. Orexigen (OREX) held a study to find out whether or not Contrave caused any increase in chances of heart attack and heart disease. Through the course of the study, the group of scientists found that not only did Contrave not add any risk of future heart problems, but it actually reduced those risks. When the announcement came out, Orexigen’s stocks price grew astronomically. There’s only one problem, the FDA hasn’t approved the new use of the pill, and they’re pretty upset about it. So, today we’ll talk about what the FDA has to say about Orexigen’s premature announcement, take a look at the stock before the announcement, after it, and see what’s happening today, and finally discuss whether the company’s stock should rise or fall throughout the rest of the day.
The FDA Speaks Out About Orexigen’s Heart Benefit Claims
Forbes recently released news that John Jenkins spoke out about the Contrave test results; the results that were prematurely shared with the world. Mr. Jenkins played a major role in working out the details of the heart safety study revolving around Contrave. In an interview with Forbes, this is what Mr. Jenkins had to say…
“We’re concerned that physicians and patients not make healthcare decisions based on data that are highly unreliable. I characterized the earlier as trying to understand who is going to win a football game at the end of the first quarter. We have lots of examples where interim analyses can give very misleading results compared to what the eventual outcome of the trial may be…” – Click here to read the full post on Forbes…really! It’s well worth the read!
All in all, if you don’t have a moment to read the Forbes post, Mr. Jenkins made it clear that the trial results for Contrave’s heart benefits to date are “Unreliable” and “Misleading”.
Orexigen (OREX) Stocks Reaction To Contrave | Before, After, and Today
Before Orexigen (OREX) made the announcement that Contrave could reduce the risk of heart attack and heart disease, stocks were trading relatively flat. We’d see slight growth and slight falls here and there, but really not enough movement to speak of. However, as soon as the announcement came out, the stock climbed. After closing the day at $5.79 per share on March 2nd, the stock had climbed to $7.64 by March 3rd. March 4th brought even more upward trends; bringing the stock to $8.49 per share (Up more than 30% from 3 days before).
However, the FDA would soon make an attempt to clear the air of rumor and unreliable data. As a result, the stock started to fall dramatically on March 5th, closing the day at $8.01 per share. Today, March 6th, that fall is continuing. Currently (11:37) the stock is trading for $6.82 after dropping nearly 15% for the day.
What We’ll Se From Orexigen (OREX) Stock Moving Forward
Sadly, I don’t think we’ve seen the last of the drop. Most likely, the price will continue to decline throughout the day. Nonetheless, I still do have faith in Orexigen (OREX) stocks for the long run. Regardless of whether or not the data is premature, we do know that they are testing to see if the diet pill has a dual purpose. As we saw with EXEL and several others, when a drug has multiple purposes, it sells and stocks go up! At some point, the trials will end and Contrave will most likely be found to have a new purpose…no matter how you slice it…that’s good news! It may take the FDA a while to get around to approving the drug for the new purpose, but when it happens, good things will happen for investors.
What Do You Think?
Do you think Orexigen’s stock price will fall below the $6 mark? Also, do you think that Contrave will be proven to have heart health benefits? Let us know in the comments below!