- Orexigen Therapeutics Inc. revealed Monday morning that it is filing for Chapter 11 bankruptcy, effectively selling off all of its assets.
- The biotech has secured $35 million in funding from senior secured noteholders in order to continue operations, fund its Chapter 11 process, continue paying employees and ensure the weight loss drug Contrave is still produced.
- Bids for Orexigen's assets will begin May 21, with an auction expected to take place no later than May 24. The sale is intended to close by the beginning of July.
The story of Orexigen is one of highs and lows.
Once upon a time, Orexigen was one of three biotechs that were closely watched by both industry and Wall Street in a bid to bring an obesity treatment to market.
Orexigen and competitors Vivus Inc. and Arena Pharmaceuticals were in a tight race to develop the first pills for the condition. With much of the U.S. population obese or overweight, analysts projected that obesity drugs would be an uber-blockbuster market.
Unfortunately for the three companies — and the many overweight people looking for answers — that just wasn't the case.
A variety of reasons drove failure of all three drugs on the commercial market; all required significant diet and exercise to work, and ultimately only generated a 5% to 15% drop in body weight. While efficacy was minimal, side effects remained a major challenge for these drugs. Issues like severe nausea meant even if patients tried the drug, they were unlikely to stick with it.
It turns out there is just no magic cure for weight loss.
There was also the challenge of working with payers — and even physicians. Society still doesn't see obesity as a condition that can be treated with drugs, which kept many physicians from prescribing the products and payers from covering them.
Sales of the drugs never took off, bringing in less than $100 million a year at their peak. Contrave (naltrexone/bupropion) gained approval in 2014; yet by 2016, the obesity market was considered a failure. Most of the big pharma marketing partners for these drugs slowly pulled out of their partnerships, and left the small biotechs holding the bill.
Takeda Pharmaceutical Co. Ltd. exited its partnership with Orexigen in 2016. At the time, the biotech had $214 million in cash and equivalents, and $200 million in debt due in 2020. It also faced the monumental task of commercializing Contrave on its own — an $80 to $100 million per year venture. Orexigen had only $45 million in cash and equivalents as September 2017, and reported only $61 million in product sales for the first nine months of the year.
Vivus and Arena have faced similar struggles. Arena dumped its weight loss drug Belviq (lorcaserin) in early 2017 and has since switched gears, focusing on drugs for pain and autoimmune diseases. Vivus has also moved on, focusing on a pulmonary arterial hypertension drug in its pipeline.
The tale of failed obesity drugs has not kept other companies from trying to conquer this market. Most notably, diabetes drugmaker Novo Nordisk A/S has several compounds in its pipeline that are targeting the disease and obesity has become a major push for the company.