Diet pill maker Orexigen Therapeutics is waving the white flag Monday morning after a years-long battle to bring its finances into the black. With crushing debt looming, the company is filing Chapter 11 bankruptcy in a last-ditch effort to settle its accounts.
This is not the first time the company has tried to right the ship. Back in October, Orexigen $OREX announced it was seeking bidders for the company’s assets. The last straw for the drugmaker’s suffering balance sheet was a massive debt payment that came due thanks to slow sales of Orexigen’s lead product, Contrave. The San Diego-based company was supposed to reach $100 million in sales by the end of 2017, but came in shy at just under that figure. As part of the loan terms, that failure triggered a payment Orexigen could not afford.
“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,” said Michael Narachi, Orexigen’s CEO, in a statement.
The past few years have been tumultuous for Orexigen, with the company’s stock plummeting 96% since its height in 2015. Despite a best-selling weightloss drug on the market among its branded competitors, the company has faced hurdle after hurdle, including a legal fight to defend its patent rights and a lackluster market for diet pills in general.
The company’s sole revenue driver is Contrave, which came on the market in 2014. It quickly snagged the biggest share of sales among brand name diet pills, capturing 52% and surpassing Qsymia, Saxenda, and Belviq. The company has been inching — albeit slowly — towards profitability for the past 15 years. It wasn’t enough.
Late last year, Narachi told me he hoped a merger or sale would get the company back on track with the ability to share costs with another organization. Plus, the company recently won its long patent battle with generic drugmaker Actavis, giving Orexigen market exclusivity until 2030. Narachi was hopeful that this development would sweeten the pot for potential buyers.
No dice, apparently.
In a statement, Orexigen said a controlling number of its senior secured noteholders made a $35 million commitment to the company, providing Orexigen 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.”
Orexigen’s stock is down 17% in pre-market trading, selling at $1.16 per share.
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