Why It's Lights Out for Orexigen Therapeutics, Inc.

Although we don't believe intiming the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Orexigen Therapeutics , a biopharmaceutical company focused on developing therapies to treat obesity, saw its own valuation slim down by as much as 13% during Tuesday's trading session after it and its partner Takeda Pharmaceuticals announced the discontinuation of the Light Study.

So what: According to the press release issued this morning, the Light Study, which is a nearly 9,000-person cardiovascular outcomes study that's designed to examine the long-term effects of Orexigen's Food and Drug Administration-approved weight control management drug Contrave, was not terminated due to adverse effects or superior efficacy.

Source: Orexigen Therapeutics.

Instead, following Orexigen's publication of interim analysis information in March without the consent of the FDA, the company's management portended that Contrave led to a 41% reduction in the risk of death, stroke and heart attack. This data was never meant to be in the hands of Orexigen's management team, and it certainly wasn't supposed to be doled out to Wall Street, which subsequently sent Orexigen shares higher by more than 30%. In fact, the results of the next 25% of patients in the interim analysis suggested neither a benefit nor harm, which is quite the anomaly from the first subset of results, and all the more reason to not release the results until the full data set is in, according to the lead researcher behind the study.

Orexigen will now be required to begin an entirely new cardiovascular outcomes study later this year with a new completion date of 2022.

Now what: This is pretty devastating news given that the Light Study was so close to completion and Orexigen had an opportunity to clearly surpass both of its peers, Arena Pharmaceuticals' Belviq and VIVUS' Qsymia, in terms of safety.

Orexigen is now going to face an additional six years of costs that were unplanned. Assuming Contrave is launched successfully, that may not be a huge problem, but it's not exactly as if Qsymia or Belviq have sold exceptionally well since their launch.

Following more than two years on pharmacy shelves, Qsymia's annual run rate is still a paltry $50 million based on the $12.6 million it sold during the first quarter, while Belviq has an annual run rate of roughly $51 million (although it took a year to schedule and has been on pharmacy shelves for far less time than Qsymia). The fact that Contrave is already topping $11 million in sales ($46 million annual run rate) is a good sign considering it recently came to market, but this latest news could also adversely affect its sales.

Also, given that biotech advancements are improving (pardon the pun) at the speed of light these days, and that catalysts are what drive these companies, the need to wait until 2022 for cardiovascular outcomes data may be too much for some investors to bear.

Personally, I still believe Orexigen has the tools to outsell its foes based on a combination of safety and efficacy, but being the potential best of a breed in a disappointing industry isn't necessarily a good thing or a guarantor of success. Waiting this out on the sidelines for a quarter or two to decipher whether this news affects Contrave sales may not be a horrible idea.

The article Why It's Lights Out for Orexigen Therapeutics, Inc. originally appeared on Fool.com.

Sean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.