Orexigen Therapeutics  (OREX) announced that it has elected to file a voluntary petition under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. Orexigen also intends to file a motion seeking authorization to pursue an auction and sale process under Section 363 of the U.S. Bankruptcy Code. The proposed bidding procedures, if approved by the court, would require interested parties to submit binding offers to acquire substantially all of Orexigen's assets, which would be purchased free and clear of the company's indebtedness and other liens and interests.

"The Board and management team have thoroughly assessed all of our strategic options and believe that this process represents the best possible solution for Orexigen, taking into account our financial needs," said Michael Narachi, President and CEO of Orexigen.

"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." Orexigen has filed a series of motions with the court seeking to ensure the continuation of normal operations during this process. Orexigen has the support of a controlling number of its senior secured noteholders for this process, who have made a $35M financing commitment. The company believes that this commitment provides it 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, including: continued servicing of distributors, wholesalers and global partners to ensure timely fulfillment of orders and shipments of Contrave/Mysimba; the timely payment of employee wages and salaries; and satisfaction of other obligations to patients and physicians who depend on this important therapy.

In addition, to attempt to preserve the value of its net operating losses, Orexigen has filed a motion with the court to establish limitations on trading in Orexigen's common stock by beneficial owners of at least 4.5% of Orexigen's common stock during the pendency of the bankruptcy proceedings.