Drugmaker Orexigen Therapeutics Inc. filed for bankruptcy protection on Monday and plans to sell itself, after failing to find a profitable market for its weight-loss treatment Contrave.
The move underscores the difficulties the pharmaceutical industry has encountered in finding a safe and effective diet drug in the two decades since a drug that was part of the popular “fen-phen” treatment was pulled from the market because it was causing heart problems in patients.
A new generation of diet drugs became available beginning in 2012, but they have faced questions from doctors and patients about safety risks and costs. Other new drugs include Vivus Inc.’s Qsymia and Belviq from Eisai Inc.
These drugs have been associated with relatively moderate amounts of weight loss, which has disappointed some patients. “Many health professionals share these concerns about moderate weight losses and worry also about the known and possibly unknown side effects of weight loss medications,” said Thomas Wadden, professor of psychology and former director of the Center for Weight and Eating Disorders at the University of Pennsylvania.
Orexigen’s debt obligations and near-term cash flow prompted it to seek bankruptcy protection, Chief Executive Michael Narachi said in a statement. The San Diego-based company had total assets valued at $265.1 million and total debts of $226.4 million as of Nov. 30, according to its chapter 11 petition in federal bankruptcy court in Delaware.
For the nine months ended Sept. 30, Orexigen lost $120.4 million on revenue of $61.4 million, according to its most recent quarterly report filed with the Securities and Exchange Commission.
The company plans to file a court motion seeking approval to pursue an auction and sale process, which it plans to conclude by July 2018.
The U.S. Food and Drug Administration approved Contrave in 2014 to help reduce weight in overweight and obese adults who have at least one weight-related condition such as diabetes, in addition to diet and exercise. A study showed that after one year of treatment, the drug reduced average weight in patients by about 4%, compared with a placebo.
Contrave is a single-pill combination of two older drugs: naltrexone, which treats alcohol and opioid dependence, and bupropion, which treats depression and other conditions.
When the FDA approved Contrave, it warned that the drug could increase the risk for suicidal thoughts, seizures and high blood pressure. In 2017, the agency said it was reviewing reports of patients losing consciousness after taking Contrave. The company added information to the drug’s prescribing label in 2017 citing the reports of loss of consciousness, but adding that it wasn’t possible to establish that the drug caused them.
Initially, sales expectations were high. In early 2015, RBC Capital Markets predicted that U.S. sales would be $185 million in 2017 and rise to more than $1 billion by 2024. At that time, Japanese drugmaker Takeda Pharmaceutical Co. co-marketed the drug in a license deal with Orexigen.
But Takeda withdrew from the deal in 2016, leaving Orexigen and its smaller sales force as the sole marketer.
Last year, U.S. sales of Contrave were $75 million, up from $47 million in 2016, Orexigen said Monday. The company said nearly 800,000 U.S. patients have taken the drug, but sales have fallen short of prior expectations.
Sales of the other new diet drugs have been relatively low, too. U.S. sales of Vivus’ Qsymia were about $36 million for the nine months ended Sept. 30, down 3.7% from the year-earlier period.
Takeda’s exit from the Contrave marketing deal followed a dispute between the companies in 2015, after Orexigen prematurely released interim results of a clinical trial that was testing the cardiovascular safety of Contrave. The disclosure resulted in the termination of the trial. Takeda accused Orexigen of breaching the terms of their partnership, and demanded that Orexigen pay for the cost of a new study. The companies resolved the dispute before Takeda exited the partnership, according to an SEC filing.
Orexigen said Monday its top secured creditors have made a $35 million financing commitment to the company to continue operating and marketing Contrave.
Orexigen’s biggest unsecured creditors include U.S. Bank National Association, trustee for $38.9 million in convertible notes, and Wilmington National Trust, trustee for $25.3 million in notes, according to Orexigen’s bankruptcy filing.