Orexigen Therapeutics is filing for bankruptcy and plans to auction off its obesity med, Contrave, to pay down its debt.
The San Diego-based company filed for a voluntary petition under Chapter 11 of the Bankruptcy Code. Also called a “reorganization” bankruptcy, this type of case allows a business to reorganize or sell off its assets to pay its creditors over time. Orexigen plans to hold an auction on May 24 and conclude the sale by July 2, the company said in a statement.
"The Board and management team have thoroughly assessed all of our strategic options and believe that this process represents the best possible solution for Orexigen, taking into account our financial needs," said CEO Michael Narachi. "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."
Orexigen has long struggled with Contrave. Besides being turned back by the FDA three years before the drug’s eventual approval in 2014, the company lost its marketing partner, Takeda, in early 2016, amid underperforming sales and an expensive, FDA-mandated outcomes trial. This left Orexigen to push Contrave in the U.S. without the Japanese pharma’s 900 sales reps, who helped make up for the drug’s third-to-market entry.
Takeda had already threatened to dump the partnership the previous year when Orexigen botched a cardiovascular outcomes trial, necessitating a do-over, which was projected to cost as much as $250 million.
In an October 2017 SEC filing, the obesity drugmaker included “attempting to pursue a merger or sale of the company” in a list of actions it was considering to fulfill its debt requirements. The move came after the company reported $42.3 million in sales from the first half of 2017, which, along with projected third-quarter sales of $18.1 million to $19.1 million, would leave the company hanging on a hefty fourth quarter to meet its debt.