Orexigen Execs Quit on Heels of Obesity Drug Data

A major management shakeup at Orexigen Therapeutics(OREX Quote) announced Friday comes weeks before the small drug company is set to release pivotal phase III data on an experimental obesity drug.

Shares of the San Diego-based drugmaker were down $3.10, or 57%, to $2.30 Friday after the company said three top executives, including CEO Gary Tollefson, would be leaving the company. Two drug development programs in midstage trials were also discontinued.

The unexpected shakeup comes as Orexigen gears up to release the first phase III data on its obesity drug Contrave. Results from a study of Contrave in patients with mild to moderate obesity are expected soon, perhaps in early January.

Tollefson has been battling cancer, so his decision to leave Orexigen is not a total surprise. However, the departure of Chief Business Officer Anthony McKinney and Frank Bymaster, vice president of neuroscience, is rattling the confidence of investors. McKinney, in particular, was seen by some as a possible choice to lead Orexigen in the future.

"The facts that these guys are all leaving right before the Contrave data are announced is not going to inspire much confidence," said one analyst for a buy-side healthcare investment firm with no position in the company.

Orexigen is one of three small drug companies -- Vivus(VVUS Quote) and Arena Pharmaceuticals(ARNA Quote) being the other two -- with obesity drugs in late-stage clinical development. As reported earlier this week, Vivus is expected to announced results from clinical trials of the company's obesity drug Qnexa any day.