Obesity-Drug Makers Stop Getting Bullied

Even bullies can have a change of heart.

When it comes to obesity drugs, there's really no better way to describe the Food and Drug Administration recently than as a bully. Over the course of four months, the agency tormented obesity-drug makers with three separate rejections -- VIVUS' (Nasdaq: VVUS) Qnexa, Arena Pharmaceuticals' (Nasdaq: ARNA) lorcaserin, and Orexigen's (Nasdaq: OREX) Contrave -- and pulled a fourth -- Abbott Labs' (NYSE: ABT) Merida --- off the market. Then the agency bullied the rejected biotechs a little more, increasing the list of things they had to do to get their drugs approved, which includes conducting unrealistic clinical trials.

But the agency seems to be having a change of heart. Rather than treat obesity treatments as lifestyle drugs that need a perfect bill of health on the safety side to gain approval, the agency seems to be acting somewhat reasonably -- at least according to the companies.

Last week, VIVUS said it had reached an agreement with the FDA to allow it to apply for approval in just men and women without child-bearing potential while it waits for data on whether the drug adversely affects fetuses.

And then yesterday Orexigen said the agency has agreed to a much smaller clinical trial than the 60,000-to-100,000-patient trial the agency had originally asked for. The new trial design will require less than 10,000 patients and could read out in less than two years.

So where does this leave VIVUS, Arena, and Orexigen? While prospects for approval are looking better than they were a few weeks ago, investors certainly aren't convinced that the chance of an FDA approval is as high as it was before the rejections.

Source: Yahoo! Finance.

That seems about right to me; VIVUS isn't as dependent on Qnexa since it also has an erectile dysfunction drug in the works. There's just not that much to get excited about here. Obesity drugs are still relative long shots being developed by companies that may have to raise more cash between now and an approval.

The bully may have seen the light of day, but its targets are still stuck in a locker with their shorts pulled over their heads.

Interested in keeping track of the obesity drugs as they make a second attempt at approval? Add them to the Fool's free My Watchlist service to keep track of all our Foolish coverage of the companies.

• Add VIVUS to My Watchlist.
• Add Orexigen Therapeutics to My Watchlist.
• Add Arena Pharmaceuticals to My Watchlist.

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