That’s No Fun: Orexigen Therapeutics, Inc. (OREX) Stock Crashes on Back of Chapter 11 Bankruptcy

It’s a short and dramatic plunge for Orexigen Therapeutics, Inc. (NASDAQ:OREX). Today, the diet pill maker’s shares lost 75% of their value. Pressuring the stock? Following years of big losses, Orexigen announced that it has elected to file a voluntary petition under Chapter 11 of the Bankruptcy Code. Orexigen also intends to file a motion seeking authorization to pursue an auction and sale process under Section 363 of the U.S. Bankruptcy Code.

The proposed bidding procedures, if approved by the court, would require interested parties to submit binding offers to acquire substantially all of Orexigen’s assets, which would be purchased free and clear of the company’s indebtedness and other liens and interests. Such parties could include strategic and financial buyers, and the process is expected to proceed according to the following timeline:

  • Bids expected to be submitted by May 21, 2018
  • Structured auction targeted to commence no later than May 24, 2018
  • Sale intended to be concluded by July 2, 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.”

Narachi continued, “Orexigen was founded on the premise of helping to improve the health and lives of patients struggling to lose weight. This mission has been at the core of creating patient-centric solutions that help customers and patients in meaningful and relevant ways. Since the launch of Contrave, nearly 800,000 patients in the U.S. have benefitted1, and, through a successful transaction process, we intend that this growing patient demand will continue to be served.”

Orexigen has filed a series of motions with the court seeking to ensure the continuation of normal operations during this process. Orexigen has the support of a controlling number of its senior secured noteholders for this process, who have made a $35 million financing commitment. The company believes that this commitment provides it with sufficient liquidity to conduct its business in an uninterrupted manner, fund its chapter 11 case, including the sale of its assets, and to continue to meet its operational and financial obligations, including: continued servicing of distributors, wholesalers and global partners to ensure timely fulfillment of orders and shipments of Contrave® (naltrexone HCl and bupropion HCl extended release)/Mysimba™ (naltrexone HCl and bupropion HCl prolonged release); the timely payment of employee wages and salaries; and satisfaction of other obligations to patients and physicians who depend on this important therapy. In addition, to attempt to preserve the value of its net operating losses, Orexigen has filed a motion with the court to establish limitations on trading in Orexigen’s common stock by beneficial owners of at least 4.5% of Orexigen’s common stock during the pendency of the bankruptcy proceedings.

The petition was filed in United States Bankruptcy Court for the District of Delaware, Case No. 18-10518.

Recent Business Highlights

  • Contrave is the No.1 prescribed weight loss brand in the U.S.
  • >2.3M prescriptions have been written in the U.S. since launch
  • >100,000 unique U.S. prescribers of Contrave since launch
  • 23% year-over-year TRx growth in the U.S. in 2017
  • 21% year-over-year TRx growth in the U.S. in 2018 to date
  • All-time highs in weekly TRx volume (19,247), branded TRx market share (48.7%) and telemedicine/home delivery volume (2,288) achieved in early March 2018
  • 2017 U.S. Contrave net sales of ~$75M compared to ~$47M2 in 2016
  • 2017 global supply revenue from international partners of ~$13M compared to ~$5M in 2016
  • Implemented streamlined and innovative U.S. commercial model, with expected annual savings of ~$40M in 2018, under the current plan, compared to 2017
  • Launched in 24 of 68 partnered countries, with an additional 14 launches currently planned in 2018
  • U.S. market exclusivity solidified through 2030 following favorable ruling in patent litigation
  • Recent FDA acceptance of a significantly more efficient approach for completion of a cardiovascular outcomes post marketing requirement


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