Can Orexigen fund a major new cardio study of Contrave?

The FDA's formal decision to overlook a positive advisory panel vote for Orexigen's weight drug Contrave and force it to complete a pre-approval cardiovascular safety study will cost the biotech company dearly. Adam Cutler, an analyst at Canaccord Genuity, estimates that it will take three to six years to complete that kind of study, which will cost $100 million to $200 million. As Matthew Herper at Forbes notes, that's up to twice the company's market cap.

Jefferies analyst Corey Davis looked at the mountain that Orexigen has to climb now and quickly turned skeptical about its ability to reach the summit. "With Contrave looking unlikely to ever see the finish line, our (Orexigen) investment thesis has been dealt a serious blow," Davis wrote.

Orexigen shares lost more than 70 percent of their value yesterday as investors reacted harshly to the unexpected news. The decision also is causing real headaches for Vivus and Arena, which competed with Orexigen to win the first new approval on an obesity drug in more than a decade. The FDA's decision on Contrave is a clear signal that regulators are raising the bar very, very high on safety, and that could chill all the R&D work now underway in the field.

- read the report from Forbes
- here's the AP report