Orexigen Therapeutics Inc. 

3/12/18

Orexigen Therapeutics is a publicly-traded ($OREX) biopharmaceutical company with one FDA-approved product - "Contrave" - an adjunct to a reduced-calorie diet and exercise for chronic weight management in certain eligible adults. (Before we continue, please take a minute to appreciate the exquisite creativity these folks deployed with the name, "Contrave." Control + crave = Contrave. We hope they didn't shell out too much cash money to the brand consultants for that one). 

Anyway, the drug could theoretically service the 36.5% of adults the Center for Disease Control & Prevention has identified as obese, a potential market of 91-93 million people in the United States alone. And that number is predicted to rise to 120 million people in the next several years. Yikes: that's 33% of the U.S. population. Apropos, the drug is the number one prescribed weight-loss brand in the US with over 1.8 million prescriptions written to date, subsuming 700,000 patients. The drug is also approved in Europe, South Korea, Canada, Lebanon, and the UAE. 

All of that surface-level success notwithstanding, the company has lost approximately $730 million since its inception. This is primarily because it has been spending the last 16 years burning cash on R&D, clinical studies for FDA approval, recruitment, manufacturing, marketing, etc., both in and outside the U.S. And people wonder why drugs are so expensive. The company believes it could be profitable by 2019 under its existing operating model and revenue forecasts; it enjoys a patent until 2030. 

Obviously the patent is critical because the company, through its banker, attempted a sale prior to the bankruptcy filing but proved unsuccessful. The goal of the bankruptcy filing, therefore, is to effectuate a sale with the benefit of "free and clear" status. While no stalking horse bidder is lined up, The Baupost Group LLC, is leading a group of secured noteholders (including Ecori Capital, Highbridge Capital and UBS O'Connor) to provide a $35 million DIP credit facility and buy the company some time. Will they end up owning it? 

• Jurisdiction: D. of Delaware 
• Capital Structure: $165mm 0% '20 convertible notes (The Baupost Group LLC), $115mm 2.75% '20 convertible notes ($25 million outstanding, Wilmington Trust NA), $49.6mm 2.75% '20 convertible exchange senior notes ($38.9 million outstanding, US Bank NA) 
• Company Professionals:
  • Legal: Hogan Lovells LLP (Christopher Donolo, Eric Einhorn, Christopher Bryant, Jon Beck, Sean Feener) & (local) Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Andrew Remming, Jose Bibiloni)
  • Financial Advisor: E&Y
  • Investment Banker: Perella Weinberg Partners 
  • Claims Agent: KCC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prepetition Collateral Agent & Prepetition Trustee: U.S. Bank NA
    • Legal: Kelley Drye & Warren LLP (James Carr, Benjamin Feder)
  • DIP Lenders
    • Legal: Quinn Emanuel Urquhart & Sullivan LLP (Eric Winston)
  • DIP Administrative Agent: Wilmington Trust Company
    • Legal: Arnold & Porter (Tyler Nurnberg)
  • DIP Lender: Highbridge Capital Management LLC
    • Legal: Brown Rudnick LLP (Robert Stark, Stephen Levine, Uchechi Egeonuigwe) & (local) Whiteford Taylor & Preston LLC (Christopher Samis, L. Katherine Good, Aaron Stulman)
  • Official Committee of Unsecured Creditors
    • Legal: Elliott Greenleaf PC (Rafael Zahralddin-Aravena, Eric Sutty) & (local) Irell & Manella LLP (Jeffrey Reisner, Michael Strub Jr., Kerri Lyman)

Updated March 30, 2018