Jeff Smith noon, March 8
Gamblers Betting on Orexigen Diet Pill. Be Careful
Stock of La Jolla-based biotech Orexigen Therapeutics is up 13.7% this morning to $5.56. As Bloomberg News points out, option traders are heavily betting that the company's developmental prescription diet pill, Contrave, may get the nod from the Food & Drug Administration as the first prescription diet pill in a decade. On Tuesday, an FDA advisory panel will meet to discuss wether to recommend Orexigen's Contrave for approval. The FDA is not bound by panel decisions, but usually follows them. Tomorrow (Dec. 3), briefing documents should show up on FDA's website. In September, the panel voted 9-5 against lorcaserin, a developmental weight control drug from San Diego's Arena Pharmaceuticals. The agency also nixed a drug from another company, Vivus, Inc. Keep a couple of things in mind: biotech stocks are extremely volatile. Those who bet on options tend to be gamblers, not investors, although they hedge the options. Also, Orexigen stock until today had fallen 34% this year, dropping for five consecutive days until today. The stock was down 59% from its initial public offering price in April of 2007.