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There's a 50/50 chance that Abbott Labs' (NYSE: ABT ) weight-loss drug Meridia will get pulled off the market. Whoop-de-do, say investors, who sent the drugmaker up 0.5% yesterday while the Food and Drug Administration advisory committee discussed the drug's potential to increase heart issues.
At the conclusion of the meeting yesterday, the panel voted 8-8 in a split over whether to keep the drug on the market. Of the eight who voted in favor of keeping the drug on the market, six wanted a stronger warning and a limit on the number of doctors who could prescribe the drug, while two thought a stronger warning on the label was sufficient.
Either way, it doesn't matter much to Abbott. With sales expected to be just $30 million this year, Meridia isn't that big of a seller, especially for a company Abbott's size. Can you say "rounding error?"
The decision might have an effect on the three obesity drugs currently under review by the FDA -- VIVUS' (Nasdaq: VVUS ) Qnexa, Arena Pharmaceuticals' (Nasdaq: ARNA ) Lorcaserin, and Orexigen Therapeutics' (Nasdaq: OREX ) Contrave. All three companies are small and counting on approvals to bring in revenue.
But in which direction will the panel's vote on Merida push the FDA? If the FDA pulls Merida, or severely restricts its prescriptions, the agency might decide that patients need some other alternative. Roche's Xenical, which is sold by GlaxoSmithKline (NYSE: GSK ) as lower-dose over-the-counter Alli, has side effects of its own -- oily discharge, ewww -- so maybe Merida's issues make an approval of an alternative more likely.
But restrictions on Merida could signal that the agency remains very safety-conscious. There's already a safe treatment for obesity -- diet and exercise -- that can be a fairly effective way to shed pounds.
Ilan Moscovitz wonders whether these are the next two dividend blowups.