Cash Woes Lead SoCal's Orexigen to Seek Merger or Sale of Company

Published: Oct 16, 2017 By

Finance

In a filing with the U.S. Securities and Exchange Commission (SEC)Orexigen Therapeutics indicated that it may not have enough funds to continue operating.
 
Although the company has not formally completed its third-quarter financial reporting, it expects total revenues for the third quarter to be between $18.1 million and $19.1 million, including U.S. net sales of Contrave (naltrexone HCL/bupropion HCL extended release), which are expected to account for $17 million and $18 million. It also expects it will have about $70.6 million in cash, cash equivalents, and short-term investments as of Sept. 30, 2017.
 
Orexigen does also say that it’s possible these estimates and projections may different “materially” from its final, audited figures.
 
As part of its routine quarterly close process, the company’s management is evaluating whether or not it will be able to continue operations and meet its obligations. That evaluation will include reviewing projected product sales, revenues and expenses, evaluating working capital requirements and its ability to pay its debts if its consolidated net product sales for fiscal 2017 are less than $100 million.
 
In order to prepare for such an eventuality, Orexigen is considering various options, including securing additional financing, negotiating waivers or amendments with its Secured Notes holders, and pursuing a merger or sale.
 
On Oct. 13, the company announced that it had received a favorable ruling from the U.S. District Court for the District of Delaware in its litigation with Actavis Laboratories for three patents for Contrave. “Orexigen’s intent was to vigorously defend our intellectual property and we are very pleased with the Court’s decision upholding the validity of all of the patents involved in the case,” said Michael Narachi, Orexigen’s president and chief executive officer, in a statement. “The Court’s positive decision allows Orexigen to continue to fulfill its mission to provide innovative medicine to treat patients who are overweight or struggling with obesity.”
 
Interesting, given today’s announcement, Narachi also said, “As we progress on our path to profitability by 2019, we expect that exclusivity through 2030 will provide many valuable years of growing profitability for Contrave.”
 
As Stock News Union wrote on Oct. 13, “Curioiusly, Orexigen Therapeutics, Inc. traded lower after a United States District Court issued a favorable ruling in a patent litigation case involving three patents for its obesity drug Contrave. Shares of the company fell 3.43 percent in Friday’s trading session to end the week at $1.97 a share.” Shares traded around $5.20 per share in February.
 
Investors apparently haven’t been thrilled with the company since the termination of a collaboration deal with Takeda to commercialize Contrave. Stock News Union writes, “The termination initially resulted in an increase in sales leading to net revenue increase, per unit, of 37 percent. However, the increase was later offset by costs of commercialization of the drug. Orexigen Therapeutics has sought to change the situation by taking several steps to drive Contrave sales, in a bid to offset the costs. The company has already initiated speaker programs, as well as patient starter kits and promotional materials.”
 
At least part of the issue is competition. There are other products on the market for obesity by VIVUS, Novo Nordisk and Arena Pharmaceuticals.

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