Orexigen Finds A Cautious Partner

Big Pharma is certainly no longer in a big rush to partner up with biotech companies working on obesity drugs. Stung by catastrophes like Wyeth's ill-fated partnership with Interneuron in the 1990s, Sanofi's (NYSE:SNY) failure with rimonabant, disappointment from Roche's (Nasdaq:RHHBY) Xenical and Abbott's (NYSE:ABT) Meridia, and a generally unwelcoming FDA, many companies have backed away from this space entirely

Consequently, Orexigen's (Nasdaq:OREX) announcement of a partnership deal with Takeda for OREX's weight loss drug Contrave needs to be seen in the context of a grudging buyer's market.  

The Best Deal Available?
On the surface, Orexigen's deal with Takeda does not look great. Takeda is offering only a $50 million milestone payment (which may be the only guaranteed money Orexigen gets). That said, the back-end of the deal is favorable if Contrave makes it to the market and achieves good sales. Takeda will be paying tiered royalties that reach into the 35% range, as well as potential future milestones that could be worth up to $1 billion. 

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