Disappointing Quarterly Results Hinder The Chart Prospects Of Orexigen Therapeutics, Inc. (NASDAQ:OREX)

[[tagnumber 0]][[tagnumber 1]]The last twelve months have brought about quite a few developments for Orexigen Therapeutics, Inc. (NASDAQ:OREX), a biotech focused on the treatment of obesity and chronic weight management. During that time, the company hit a couple of milestones and its 52–week range from $2.62 to $9.37 per share is clear enough indication of the stock’s fairly volatile nature.[[tagnumber 2]] [[tagnumber 0]]Roughly one hour before the end of the current session, OREX shares are traded at $2.77 per share, down 4% from the day before. With slightly more than 1 million shares of turnover, today’s session is shaping up as one of the less interesting for traders. Thus, OREX is now finding itself much closer to its 52–week low and the real question is why this is the case.[[tagnumber 2]] [[tagnumber 0]][[tagnumber 6]]This question is important because the company seems to be on a right track. Last September, OREX got an FDA clearance for its Contrave drug designed to treat obesity when used as an adjunct to a low–calorie diet combined with active physical activity in adults. Orexigen went even further by submitting a similar application on the other side of the pond before the European Commission in order to market the drug across the European Union, as well as the European Economic Area. The approval became a reality in late–March 2015 and OREX has since gained the right to market its Contrave drug in 31 European countries altogether under the brand of Mysimba. If this were not enough, Orexigen has only recently sealed a distribution agreement with a Korean pharmaceutical company with the prospect of selling Contrave in South Korea contingent upon the government’s approval.[[tagnumber 2]] [[tagnumber 0]]While expanding a business worldwide may prove to be a very rewarding experience in the end, success does not necessarily happen overnight and Orexigen’s most recent quarterly report revealed just that. Indeed, the 10–Q for the second calendar quarter of 2015, which came out on Aug. 6, paints a slightly controversial picture of the business’s development so far. On the one hand, the number of Contrave prescriptions has been growing rapidly with 172 thousand prescriptions filled in Q2 vs 117 thousand registered in Q1. As a result, net sales have gone up from $11.5 million to $16 million on a sequential basis. The thing is, Orexigen didn’t rake in all this revenue by itself. Rather, it only got a portion thereof in the form of royalty payments of $2.3 million (Q1) and $3.1 million (Q2) pursuant to a collaboration agreement with Takeda Pharmaceutical Company Ltd, an OREX partner holding the rights to commercialize Contrave in the United States. Both parties have recently updated their agreement in an attempt to align their interests and settle any outstanding disputes.[[tagnumber 2]] [[tagnumber 0]]We have yet to see how the restated papers will affect the Q3 numbers in due course. What is as clear as a bell is that with a net quarterly loss of $22.5 million, OREX is still far from making money regardless of all the milestones it has achieved so far. This gives us a clue as to why investors are still reluctant to go bullish on the stock, as well as why the short interest in OREX greatly exceeds its average daily volume. It also explains why the net insider activity for the last 12 months is a negative number.[[tagnumber 2]] [[tagnumber 0]]As long as this bearish sentiment towards OREX remains prevalent among traders, the stock might have trouble bouncing back closer to its 52–week highs. A minor rebound seems possible since OREX is pretty much oversold now.[[tagnumber 2]] [[tagnumber 0]]To secure long–term growth, Orexigen will need to a/further penetrate the U.S. markets and b/ conquer foreign niches. Some Wall Street analysts expect narrowing losses over the next couple of years and recommend the stock as a “buy”. The next quarterly report will provide a basis for further analysis on OREX’s chart potential.[[tagnumber 2]]