Why Orexigen Therapeutics' Stock Rocketed Higher

What: Shares of the anti-obesity drugmaker Orexigen Therapeutics climbed by as much as 21% on heavy volume today. This rally was sparked by the company's second-quarter earnings release, where it announced that its flagship fat-fighting pill, Contrave/Mysimba, is now the market leading weight loss medicine with 172,050 prescriptions filled during the three-month period.

Perhaps more importantly, though, Orexigen also updated investors on its ongoing dispute with Takeda Pharmaceutical, Contrave's U.S. marketing partner. As a refresher, Takeda was seeking to potentially dissolve its collaboration with Orexigen over the release of the drug's interim results from its FDA-mandated cardiovascular outcomes trial dubbed the "Light Study". Per today's announcement, the two companies have now resolved their outstanding disagreements, and have reaffirmed their commitment to Contrave's long-term success.

So what: Orexigen's shares have been in a tailspin since this faux pas over the Light Study's interim data disclosure. Specifically, the drugmaker's shares, prior to today's jump, were down over 40% for the year. The market was deeply concerned that Orexigen would lose Takeda's backing for Contrave altogether, making it solely responsible for completing the drug's required post-marketing studies, as well as handling the commercialization efforts in the U.S.

Now what: While Takeda's decision to stick around is definitely good news for Orexigen, the bad news is that Contrave only mustered $16 million in U.S. net sales during the second-quarter. As a result, Orexigen is still hemorrhaging money to the tune of a net loss of $22.5 million, per the second-quarter figures, despite having an approved product on the market.

Put simply, you may want to remain cautious with this small-cap biopharma for the time being, despite today's positive news.

The article Why Orexigen Therapeutics' Stock Rocketed Higher originally appeared on Fool.com.

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