Orexigen Therapeutics (OREX, $5.89, down $0.10) was up sharply in after-hours trading on news that the company could be announcing something concerning its treatment drug for obesity, Contrave. The company will presenting at a JPMorgan (JPM, $29.25, down $2.10) conference next week which means the rumor mill got started early on what the company will say. The stock was up 20+%, or $1.30, to $7.20 in after-hours trading.

What surprises me is that it took until after the market closed for the stock to make a move as Wall Street seemed to ignore the fact that the company was awarded another patent for Contrave on Monday. It was the fourth patent for the drug which will provide protection until 2024.

Of course, Orexigen isn’t the only outfit trying to rush these new drugs to market. Vivus (VVUS, $5.37, down $0.12) and Arena Pharmaceuticals (ARNA, $4.22, down $0.03) are a couple of others. The race for the next generation of weight-loss drugs is on and all three companies are in phase 3 trials with results due this year. Orexigen appears to have the early lead in this race but there are always risks especially with biotech.

There wasn’t much option activity in Monday’s trading as the January 7.50 calls (QRFAU, $0.80, unchanged) for Orexigen Therapeutics traded only 10 contracts. The bid was at $0.35 while the ask was $1.50. DO NOT try and trade this one because 1) there is not much volume and 2) there will be a huge spread between the bid and ask. Now that the news is out there will be an even bigger discrepancy.

Rick Rouse
Rick@OptionsMentoring.com

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