Anti-Obesity Drugmaker Orexigen Therapeutics Files for Bankruptcy

Shares of weight-loss drugmaker Orexigen Therapeutics Inc. are in free-fall this morning after the company announced it filed for bankruptcy.

Orexigen stock is down more than 68 percent in premarket trading after the company said it will seek to sell off its assets, including weight loss drug Contrave. Orexigen said it will file a voluntary petition under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court to initiate the potential sale.

In its announcement this morning Orexigen said it anticipates bids for its assets by May 21 and a structured auction to be held no later than May 24 of this year. The sale is expected to be completed no later than July 2, the company said.

The decision to file for bankruptcy and sell assets came after Orexigen’s senior leadership and board of directors assessed all options, said Orexigen’s Chief Executive Officer Michael Narachi. In a statement, Narachi said the decision “represents the best possible solution,” particularly when taking the company’s finances into account.

“While we have been working closely with our noteholders and have the support of a controlling number of senior secured noteholders, our debt covenant requirements and near-term cash flow needs have necessitated the protection afforded by a court-driven process,” Narachi said in a statement.

For Orexigen the writing has been on the wall for some time, despite the fact that Contrave is the number-one prescribed anti-obesity treatment in the United States. In October of 2017, the company indicated it may not have enough funds to continue operating. The company indicated at that time it was open to the idea of a sale or possible merger. That announcement came about a month after the company announced the launch of a nationwide campaign to educate those struggling with obesity about Contrave.

In 2016 Takeda Pharmaceutical sold its North American rights back to Orexigen for $60 million. The return of the drug was part of a realignment of Takeda’s treatment focus on its focus on its inflammatory bowel disease drugs, gout and diabetes products.

Contrave was approved by the U.S. Food and Drug Administration in 2014 for use in extremely overweight individuals. Contrave is a combination of naltrexone, a drug used to treat alcohol and opioid dependence, and bupropion, a depression treatment. Contrave is designed not only to curb hunger but also reduce cravings. Last year at BIO Thomas Cannell, Orexigen’s chief operating officer, told BioSpace that the cravings for foods that make it so hard to lose weight for many people. Since its launch, 2.3 million prescriptions for Contrave have been written in the United States, according to the company. The company said Contrave accounted for about $75 million in sales in 2017, a significant jump over the $47 million it brought in in 2016.

As Orexigen’s assets are sold off Narachi said the company intends to see people struggling with obesity to continue to be served by Contrave.