(This story has been updated with information on severance packages, and the closing share price)
Orexigen Therapeutics is getting hammered by investors today. The San Diego biotech company (NASDAQ: [[ticker:OREX]]) dropped 35 percent to $3.51 at the close of trading after it said it is scrapping development of two experimental drugs to conserve cash, and several top executives headed for the exits.
Orexigen will now be essentially doubling down its bet on obesity drugs in the final stage of development, while getting rid of a drug candidate to treat weight gain from antipsychotic meds (OREX-003), and another for obsessive compulsive disorder (OREX-004). The company also said CEO Gary Tollefson, who is battling a case of acute leukemia, resigned as of yesterday rather than coming back from a leave of absence. Chief Business Officer Anthony McKinney, Chief Scientific Officer Michael Cowley, and Frank Bymaster, the vice president of neuroscience, all quit, although Cowley will become a consultant, the company said. Eckhard Weber is serving as interim CEO, and the company has hired a search firm to look for a permanent boss.
The company, which has no moneymaking products on the market, said it had $100 million in cash and investments at the end of September, and a net loss of $71.1 million in the preceding nine months, as I pointed out in this analysis last month of the financial strength of San Diego’s biotech companies. Orexigen didn’t say today how much the cuts will improve its financial future, but it said it will funnel all of its remaining resources into developing a combination of bupropion and naltrexone (Contrave) for obesity, as well as another weight-loss drug called zonisamide sustained release and bupropion SR (Empatic). Results from a final-stage clinical trial of Contrave are expected in January.
Tollefson will receive a lump-sum severance payment of $212,500 on June 10, and three monthly payments of $35,417 each in July, August, and September, the company said later today in a regulatory filing. He will also get a $255,000 payment instead of his 2008 bonus, and reimbursement for moving expenses worth as much as $325,000.
