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Obesity drug developer Orexigen Therapeutics Inc. inched higher in its debut as a public company on Thursday, April 26.

Thanks to strong demand, Orexigen decided to price 7 million shares, a million more than the 6 million originally planned, at $12 each, the midpoint of their expected range. The stock trades on the Nasdaq under the symbol OREX.

In early afternoon trading, the stock has gained roughly 7%, and had hit a high of $13.10 each.

While initial public offerings in the technology sector have done fairly well in 2007, biopharma offerings have had a harder time. First-quarter offerings from VC-backed companies such as Synta Pharmaceuticals Corp., Oculus Innovative Sciences Inc., and Optimer Pharmaceuticals Inc. were all slow out of the gate. And in the aftermarket, they have had varying degrees of success, with Synta and Oculus well below their offering price, while Optimer has gained 44% since going public. Nevertheless, the recent life breathed into the IPO, has been a tremendous boon for the venture capitalists able to exit their investments with sizeable profits.

This IPO has given Orexigen's venture capital investors — Domain Associates, Kleiner Perkins Caulfield & Byers, Sofinnova Venture Partners, Montreux Equity Partners, Morgenthaler Partners, MPM BioEquities, Scale Venture Partners and Wasatch Advisors — homerun profits on their investments.

At the offering price, the 16.2% of the company held by Orexigen's two largest institutional shareholders, Domain and KPCB, was worth $48.28 million and $45.16 million, respectively. Sofinnova and Scale hold positions valued at $33.87 million and $33.56 million each; and the stock owned by Montreux and Morgenthaler Partners was worth $16.78 million and 13.42 million.

Late-stage investors MPM BioEquities and Wasatch Advisors each own less than 5% of Orexigen and their positions were not listed in the SEC filings.

San Diego-based Orexigen is developing weight-loss drugs based on neurological research involving pathways in the brain that suppress appetite and increase satiety, and has two main products in its pipeline.

The first, Contrave, had its phase 2 trial results submitted to the FDA in October 2006; the second, Empatic, is currently in a second Phase II clinical trial to evaluate optimal dose ratios for its active ingredients.

Like most pharmaceutical companies, Orexigen has been raking up big losses has it develops its two candidates. The company's net losses reached $27.5 million in 2006, with an accumulated deficit of $49.2 million at the end of 2006, which Orexigen expects to increase in connection with ongoing clinical trials for its product candidates.

Each of the two compounds combines bupropion, an inhibitor of the uptake of certain neurotransmitters, with another drug. Orexigen's rapid weight-loss drug, Empatic, includes anti-convulsant drug zonisamide, while its drug intended for steady and sustainable weight loss, Contrave, includes alcohol dependence drug naltrexone.

Orexigen's scientists have claimed that the neurological approach keeps patients from reaching a weight-loss plateau, followed by regaining weight.

Launched in 2003 to commercialize technology developed at Oregon Health & Science University in Portland, Ore., Orexigen raised about $76 million in venture capital.

The January 2004 first round secured $11 million for the company; followed by a $35 million second round in May 2005; and a $30 million Series C in November 2006.

Series A investors Domain Associates of Princeton, N.J., and Kleiner Perkins Caulfield & Byers of Menlo Park, Calif., bought 3.3 million shares each, along with 2.5 million shares for San Francisco-based Sofinnova Venture Partners, at the bargain price of $1.18 per share. The Series B round was led by Scale Venture Partners of Foster City, Calif., with full-participation shares selling at $2.36 each. The Series C shares sold at $3.42 each, when Boston-based MPM BioEquities and Wasatch Advisors of Salt Lake City came aboard as investors.

Merrill Lynch & Co. was sole book-running manager and J.P. Morgan Securities Inc. was co-lead manager for the offering. JMP Securities LLC and Leerink Swann & Co. Inc. were co-managers for the offering.

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