Orexigen Therapeutics Inc (OREX.O) said it sold the North American marketing rights for its experimental weight-loss drug, Contrave, to Japan’s Takeda Pharmaceutical Co Ltd (4502.T) in a deal that could be worth more than $1 billion, sending its shares up 23 percent.
The deal, which has an upfront payment of $50 million, comes two weeks before an advisory panel to the U.S. Food and Drug Administration is set to vote on whether a weight loss drug developed by rival Arena Pharmaceuticals Inc (ARNA.O) should be approved by the regulatory agency.
Arena has partnered with Japan’s Eisai Co Ltd (4523.T) to develop its drug, called lorcaserin. [ID:nN011171490]
Orexigen and Arena, along with Vivus Inc (VVUS.O), are vying to get approval for the first new diet drug in a decade — a goal driven by trends in the United States where nearly 27 percent of the population is considered obese.
An FDA advisory panel in July voted not to recommend approval for Vivus’ drug, Qnexa, due to safety concerns. A similar FDA committee will review Orexigen’s Contrave in December with a final decision from the agency expected by Jan. 31.
The mid-September Arena panel review will follow a hearing on Meridia, a diet drug sold by Abbott Laboratories (ABT.N) that has been pulled from the market in Europe due to heart-related risks.
JP Morgan analyst Cory Kasimov expected a partnership for Contrave would conclude only after the upcoming panel.
“That said, we are cautious not to read into Takeda’s aggressive investment in the obesity space … a $50 million upfront payment does not appear to reflect a high conviction expectation on approval but rather a call option on a high risk, high reward product,” he said in a research note.
The deal with Orexigen marks Takeda’s second obesity drug partnership. It agreed in November to pay Amylin Pharmaceuticals Inc (AMLN.O) $75 million upfront and as much as $1 billion in total to develop different weight loss drugs.
Under the Orexigen partnership, Takeda will market Contrave in the United States, Mexico and Canada.
San Diego-based Orexigen, with a market capitalization of $208 million, will retain the right to co-promote the drug in the United States.
Chief Financial Officer Graham Cooper said the company, with a cash balance of $63 million as of June 30, does not expect to raise additional capital in the “foreseeable future.”
Takeda will also pay tiered double-digit royalty, starting at 20 percent and increasing to 35 percent, to Orexigen on net sales of the drug in those areas.
The companies will also share the costs of any future development of the product, with Orexigen leading pre-approval activities and Takeda leading post-approval activities.
Orexigen’s Contrave is a combination of antidepressant Wellbutrin, known generically as bupropion, and naltrexone, which is used to treat alcoholism and other addictions.
Clinical trials have shown that obese volunteers treated with the drug lose about 5 percent more weight than patients treated with a placebo. The drug does raise blood pressure slightly, but the increase levels off over time.
The field of diet drugs has a checkered history, including the notorious fen-phen combination that was pulled from the market in 1997 when fatal heart valve problems emerged. Drugmaker Wyeth, which has since been acquired by Pfizer Inc (PFE.N), set aside more than $21 billion to settle fen-phen litigation.
Reuters