Leerink Lowers Leerink (OREX) PT to $1 on Move to Acquire Contrave Rights from Takeda

Leerink Partners analyst, Paul Matteis, noted that Orexigen Therapeutics (NASDAQ: OREX) acquired the Contrave rights from Takeda and lowered his price target to $1 (from $2) on shares as a result. The firm maintained its Market Perform rating.

Yesterday morning OREX announced that it has entered into a deal with Takeda where it will acquire US commercial rights to Contrave; concurrently, OREX also announced a commercial partnership with VRX, which will market Mysimba (Contrave ex-US) in Central Europe, Eastern European Countries, and Turkey.

OREX has agreed to pay Takeda $60MM upfront, $15MM in 1Q17, and other sales based milestones. The deal was financed through the issuance of $165MM in convertible debt, and the agreement w/ Takeda includes a 180 day transfer period (or sooner, up to OREX) during which Takeda will still be marketing Contrave in the US.

Decreasing our 2017+ revenue estimates for Contrave to reflect decreased promotion behind the product. While OREX's more targeted strategy towards high prescribers may lead to more TRx/rep over time, Takeda's 900 reps, based on OREX's description of Takeda's obligations during its recent 4Q15 EPS call (outlined in our previous note [LINK]), are relatively equivalent to ~375 fully dedicated sales reps behind the drug. Thus, the new revenue ramp accounts for a decrease to 160 dedicated reps (along w/ 15 managers).

The analyst derived a ~$1 price target for OREX shares based on an 11% discount rate and a 0% terminal growth rate, representing a ~$156MM market capitalization. He models ~$200MM in peak US sales in 2025E.

For an analyst ratings summary and ratings history on Orexigen Therapeutics click here. For more ratings news on Orexigen Therapeutics click here.

Shares of Orexigen Therapeutics closed at $0.64 yesterday.

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