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I thought Meridia should stay on the market, as did half of an Food and Drug Administration advisory panel and the manufacturer, Abbott Labs (NYSE: ABT ) . But we only have varying degrees of influence -- in my case, absolutely none -- over the FDA, which had its final say on Friday.
Pulling Meridia off the market -- technically, the FDA asked Abbott to remove the obesity drug, and it said Abbott agreed to -- isn't that big of a deal for Abbott. Meridia's sales were never super-exciting, and Abbott is so large that the lost sales won't have a major effect on Abbott's $33 billion in revenue. This is definitely not comparable to events involving Merck's (NYSE: MRK ) Vioxx, GlaxoSmithKline's Avandia, or Biogen Idec (Nasdaq: BIIB ) and Elan's (NYSE: ELN ) Tysabri -- at least, not for Abbott.
The FDA's decision on Meridia should have investors in companies developing new obesity drugs -- VIVUS (Nasdaq: VVUS ) , Arena Pharmaceuticals (Nasdaq: ARNA ) , and Orexigen Therapeutics (Nasdaq: OREX ) -- a little more worried. The agency erred on the side of caution when its panel of outside experts split. What do you think will happen to VIVUS' Qnexa and Arena's lorcaserin, for which both FDA advisory panels recommended against approval?
Orexigen's Contrave, which will be reviewed in December, might have an advantage in going last, but the FDA will still likely place a strong focus on safety. Considering that Contrave has side-effect issues of its own, there may be nothing the company can do to get past the safety-conscious agency.
Can any obesity drug win the FDA's approval? Sure -- a drug that causes weight loss that's 5 percentage points above placebo, and has side effects that are equivalent to diet and exercise. Anything below that insanely high standard is up for debate about its risk-reward profile. With the FDA leaning heavily toward minimizing risk, investors in the space need to be very careful.
Interested in keeping track of VIVUS, Arena, and Orexigen as their FDA decisions approach? Click their respective names to add them to My Watchlist, which will help you keep track of all our Foolish analysis on the sector.