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SEC Filings

10-Q
OREXIGEN THERAPEUTICS, INC. filed this Form 10-Q on 05/12/2017
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trials for Contrave. The clinical trial expenses included payments to vendors such as CROs, investigators, suppliers of clinical drug materials and related consultants. We charge all research and development expenses to operations as incurred because the underlying technology associated with these expenditures relates to our research and development efforts and has no alternative future uses.

Our internal research and development resources are not directly tied to any individual research project and are primarily deployed across our Contrave and other programs. We have developed Contrave in parallel with other projects and, due to the fact that we use shared resources across projects, we do not maintain information regarding our internal costs incurred for our research and development programs on a program-specific basis. We use external service providers to manage our clinical trials, to manufacture the product supplies used in these trials and for formulations development, consulting and other activities.

The following table summarizes our research and development expenses for the three months ended March 31, 2017 and 2016. Costs that are not attributable to a specific research program are included in the “Other” category (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2017

 

 

2016

 

Costs of external service providers:

 

 

 

 

 

 

 

 

Obesity

 

$

3,596

 

 

$

7,631

 

Other

 

 

782

 

 

 

320

 

Subtotal

 

 

4,378

 

 

 

7,951

 

Internal costs

 

 

3,201

 

 

 

2,880

 

Stock-based compensation

 

 

594

 

 

 

970

 

Total research and development expenses

 

$

8,173

 

 

$

11,801

 

 

At this time, due to the risks inherent in the drug development process, we are unable to estimate with any certainty the costs we will incur for the post-marketing requirements of Contrave and any additional clinical trials required for post-marketing requirements of Contrave, under the name Mysimba, by the EMA. Future development expenses will depend on the conduct of the randomized, double-blind, placebo-controlled cardiovascular outcomes clinical trial, or CVOT, and any other additional clinical trials for Contrave, if any, our financial resources and ongoing assessments as to Contrave’s commercial potential. Clinical development timelines, the probability of success and development costs can differ materially from expectations. The lengthy process of completing our clinical trials, and seeking regulatory approval for our product candidates requires the expenditure of substantial resources. Any failure by us or delay in completing our clinical trials, or in obtaining regulatory approvals, could cause a delay in the commencement of product revenues and cause our research and development expenses to increase and, in turn, have a material adverse effect on our results of operations.

Selling, General and Administrative

Our selling, general and administrative expenses consist primarily of salaries and related costs for personnel in executive, commercial and internal support functions, as well as professional fees for legal, consulting and accounting services. In addition, selling, general and administrative expenses include our outsourced sales representatives and other sales and marketing costs necessary for commercializing Contrave. We anticipate selling, general and administrative expenses to increase substantially as we establish our sales and marketing capabilities in the United States

Interest and Other (Expense), Income net

Other Income (Expense) consists principally of interest expense incurred on the 2013 Notes and 2017 Exchange Notes, offset by our change in the fair value of our financial instruments on our 2016 convertible debt, gain on extinguishment of 2013 Notes, income earned on marketable securities and foreign currency gains and losses. A portion of our business is conducted outside of the U.S. through our Irish foreign subsidiary. The foreign subsidiary keeps its accounting records in its functional currency, the Euro.

Income Taxes

At December 31, 2016, we had federal, state and foreign net operating loss carryforwards of approximately $445.4 million, $417.4 million and $39.0 million, respectively, not considering the IRC Section 382 annual limitation discussed below. The federal loss carryforwards begin to expire in 2027, unless previously utilized. At December 31, 2016, we have federal and state research and development tax credit carryforwards of $21.8 million and $7.0 million, respectively. The federal research and development tax credit carryforwards begin to expire in 2024 unless previously utilized. The state research and development tax credits and foreign net operating losses carry forward indefinitely. The California net operating loss carryforwards are scheduled to begin to expire in 2017.

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