Fat-fighting pharma business files for bankruptcy

Orexigen Therapeutics, a biotech that was one of a wave of companies bringing through weight-loss pills, has announced that it has filed for bankruptcy.

The company struggled to convince healthcare professionals of the safety and value of its treatment, known as Contrave, leading to struggling sales and an insupportable level of debt.

The biotech had initially cruised to a big pharma partnership, with Takeda, on the back of blockbuster hopes for the weight-loss treatment. However, it initially struggled to get its treatment past the FDA over safety fears.

This led to the FDA knocking back the treatment of first application, before it finally received approval in 2014 – as the third-to-market treatment. It entered the space behind Vivus and Arena Pharmaceuticals, who suffered similar difficulties despite getting to market earlier.

Side-effects of the treatments included severe nausea and, with the "fen-phen" scandal of the late 90s still fresh in physician’s memories, many shied away from prescribing the treatment.

This led to Takeda’s exit from the partnership, leaving Orexigen to take on the costly venture of marketing and selling the product.

With that said, sales of Contrave actually rose year-on-year since its approval – with sales up to $75 million in 2017, compared with $47 million in 2016.

The trouble was, as of 30 September 2017, the company had developed a debt burden of $765.6 million and, on current sales, cannot support the debt.

As a result, the company is looking at bids beginning on 21 May 2018, with sales intended to be concluded by 2 July 2018.

"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 Michael Narachi, President and CEO of Orexigen. "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."

The news has seen the biotech’s share price drop to $0.34, a precipitous drop from its high in 2015 of $81

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