When we observed Stevie Cohen's odd and sudden purchase of 5% of OREX stock, announced in the last minutes of trading yesterday, we speculated that either this was another blatant attempt by the man with the golden touch to purchase shares in a company which would come up with the golden grail: a drug for obesity, or "we would not be surprised if this is the first, maybe of many, red herrings thrown by the legendary hedge fund manager to indicate that he does not have a 100% batting average when it comes to predicting FDA outcomes." Well, it was the latter. OREX just got the worst news possible and the stock is about to open 60-80% lower. This will be a ~$20 million loss for the Connecticut man. One wonders, more than ever, what is the quid pro quo?
From the just issued press release:
The FDA noted concern about the cardiovascular safety profile of naltrexone/bupropion when used long-term in a population of overweight and obese subjects. Specifically, the letter stated that "before your application can be approved, you must conduct a randomized, double-blind, placebo-controlled trial of sufficient size and duration to demonstrate that the risk of major adverse cardiovascular events in overweight and obese subjects treated with naltrexone/bupropion does not adversely affect the drug's benefit-risk profile."
"We are surprised and extremely disappointed with the Agency's request in light of the extensive discussion and resulting vote on this topic at the December 7 Advisory Committee meeting," said Michael Narachi, President and CEO of Orexigen. "We plan to work closely with the Agency to gain more information to determine the appropriate next steps regarding the Contrave application."
The bottom line - is a key condition for Cohen's continued fund management now the incremental, and very visible, addition of such bad bets?