Pernix Therapeutics Buys Bankrupt Orexigen’s Weight Loss Drug for $73.5 Million
In March, San Diego-based Orexigen Therapeutics filed for bankruptcy. Back in April, Orexigen entered into an asset purchase deal with Nalpropion Pharmaceuticals to sell most of its assets, subject to court approval. Under that deal, Orexigen would sell global rights to Contrave (naltrexone HCl/bupropion HCL extended release)/Mysimba (naltrexone HCl and bupropion HCL prolonged release) and other assets. Nalpropion was formed as a special purpose entity by an investor group that includes Pernix Therapeutics Holdings.
That deal has closed and now Morristown, New Jersey-based Pernix is going to try to make Contrave work. The drug was approved by the U.S. Food and Drug Administration (FDA) in 2014, which made it the third weight-loss pill approved by the agency since 2012. The others were Arena Pharmaceuticals’ Belviq (lorcaserin) and VIVUS’ Qsymia (phentermine/topiramate). None of the drugs have dazzled in the marketplace.
Contrave seemed to do reasonably well, becoming the most widely prescribe weight-loss drug out of the three, creating more than 2.5 million prescriptions since it went on sale. However, the sales couldn’t offset Orexigen’s debt. Earlier this year it filed for Chapter 11 bankruptcy protection.
And, in fact, Arena Pharmaceuticals sold lorcaserin to Eisai in 2017 and Vivus restructured in May 2018.
Nalproprion’s investors include Highbridge Capital Management and Whitebox Advisors. Under the terms of the agreement, Pernix will manage Nalpropion and take care of Contrave distribution for two years for a fee equal to five percent of net sales. Xconomy writes, “Pernix will later receive options to acquire either up to 49.9 percent of Nalpropion or the whole business. Pernix didn’t say on Monday when it can exercise those options or how much it would pay in either scenario.”
Originally, Orexigen had been hoping to set up a “stalking horse” bidder as it entered Chapter 11. A “stalking horse” is when the company picks a company from a pool of bidders to make the first bid on the assets, setting a low-end bidding bar. But court papers say Orexigen didn’t get a “credible preliminary proposal.” It went to an open auction instead.
Xconomy, in a March article, wrote, “Orexigen’s drug is a combination of the antidepressant bupropion and the substance-abuse deterrent naltrexone. Orexigen suffered through years of setbacks before winning approval for the drug in 2014. Weight-loss drugs were experiencing a renaissance at the time…. But the FDA only approved Contrave if Orexigen kept testing it for cardiovascular side effects in a long-term study. And that study landed Orexigen in hot water with the agency once again.”
In 2015, the company’s patent applicated was based on a premature evaluation of the clinical trial, advancing the potential benefit the drug had for preventing heart attacks. But that action caused the academic researchers running the trial to shut it down, which angered the FDA, who wanted Orexigen to launch a new study. Orexigen’s then-partner Takeda wasn’t thrilled either, and wanted Orexigen to pay for the new study.
In 2016, Takeda, according to court documents saying “its overall business focus and objectives” were changing, exited the partnership in 2016. This forced Orexigen into building a new commercial infrastructure to sell Contrave in the U.S., where it got in over its head financially, with increasing debt and decreasing stock prices.
Maybe Pernix can make it work.