Orexigen Therapeutics (NASDAQ: OREX) and Five Prime Therapeutics (NASDAQ:FPRX) are both small-cap medical companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, dividends, risk, valuation, profitability, analyst recommendations and institutional ownership.

Analyst Recommendations

This is a summary of current ratings and target prices for Orexigen Therapeutics and Five Prime Therapeutics, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Orexigen Therapeutics 0 0 0 0 N/A
Five Prime Therapeutics 0 1 7 0 2.88

Five Prime Therapeutics has a consensus target price of $57.50, indicating a potential upside of 32.37%. Given Five Prime Therapeutics’ higher probable upside, analysts clearly believe Five Prime Therapeutics is more favorable than Orexigen Therapeutics.

Volatility and Risk

Orexigen Therapeutics has a beta of 2.35, suggesting that its stock price is 135% more volatile than the S&P 500. Comparatively, Five Prime Therapeutics has a beta of 4.18, suggesting that its stock price is 318% more volatile than the S&P 500.

Earnings & Valuation

This table compares Orexigen Therapeutics and Five Prime Therapeutics’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Orexigen Therapeutics $63.39 million 0.48 -$163.64 million ($7.24) -0.27
Five Prime Therapeutics $32.90 million 36.95 -$133.09 million ($4.24) -10.25

Five Prime Therapeutics has higher revenue, but lower earnings than Orexigen Therapeutics. Five Prime Therapeutics is trading at a lower price-to-earnings ratio than Orexigen Therapeutics, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

39.7% of Orexigen Therapeutics shares are held by institutional investors. Comparatively, 84.1% of Five Prime Therapeutics shares are held by institutional investors. 13.3% of Orexigen Therapeutics shares are held by company insiders. Comparatively, 6.5% of Five Prime Therapeutics shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Orexigen Therapeutics and Five Prime Therapeutics’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Orexigen Therapeutics -120.77% -824.15% -61.12%
Five Prime Therapeutics -356.39% -31.78% -27.55%

Summary

Five Prime Therapeutics beats Orexigen Therapeutics on 9 of the 12 factors compared between the two stocks.

About Orexigen Therapeutics

Orexigen Therapeutics, Inc. is a biopharmaceutical company. The Company is focused on the treatment of obesity. The Company’s product, Contrave, is approved in the United States by the United States Food and Drug Administration as an adjunct to a reduced-calorie diet and increased physical activity for chronic weight management in adults with an initial body mass index (BMI) of 30 kilograms per square meter or greater (obese) or 27 kilograms per square meter or greater (overweight) in the presence of a weight-related comorbid condition. Contrave is a combination of generic drug components, each of which has received regulatory approval for other indications and has been commercialized in the United States and in a range of member countries of the European Union. Contrave regulates appetite and energy expenditure through central nervous system (CNS) activity. Contrave is a fixed dose combination of bupropion hydrochloride (HCl) extended release (ER) and naltrexone HCl ER.

About Five Prime Therapeutics

Five Prime Therapeutics, Inc. is a clinical-stage biotechnology company focused on discovering and developing protein therapeutics. The Company’s product candidates include Cabiralizumab (FPA008), which is an antibody that inhibits colony stimulating factor-1 receptor, that it is studying in clinical trials as a monotherapy in pigmented villonodular synovitis, and in multiple cancers in combination with programmed-death 1 immune checkpoint inhibitor, Opdivo; FPA144, which is an antibody that inhibits fibroblast growth factor receptor 2b, that it is initially developing to treat patients with gastric (stomach) cancer and is in a Phase I clinical trial, and FP-1039, which is a fusion protein that traps and neutralizes cancer-promoting fibroblast growth factors, involved in cancer cell proliferation and new blood vessel formation and is in Phase Ib clinical development to treat patients with malignant pleural mesothelioma. Its preclinical programs include FPA150, FPA154 and FPT155.

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