Days after launching its obesity drug Qsymia in the U.S. last September, VIVUS (NASDAQ:VVUS) revealed that the Committee for Medicinal Products for Human Use (CHMP) -- which essentially approves or denies drugs in the EU, much like the FDA in the U.S. -- wouldn't be giving its drug the green light. The official rejection that followed indicated that the regulatory agency had concerns over the drug's long-term risks on the cardiovascular and central nervous systems.
This evening, a VIVUS press release stated that the company's appeal for approval based on existing clinical trial data was also denied by the CHMP. It looks like Qsymia, which VIVUS aims to brand Qsiva in the EU, will need to be tested in a cardiovascular outcomes study before VIVUS can reapply. These trials can be both lengthy and costly, so we'll have to see how the company decides to proceed.
You say potato, I say potato...
If Qsymia was approved by the FDA, why doesn't it also win approval in Europe?
We can actually look at another drugmaker, Novo Nordisk (NYSE:NVO), to shed some light on this complex process. Novo's new diabetes drug Tresiba was actually approved in the EU and Japan, but rejected by the FDA last week. Why? Well, according to Novo Nordisk's press release "the FDA requests additional cardiovascular data from a dedicated cardiovascular outcomes trial" before the company can try to gain approval again.
This bizarre parallel to VIVUS' situation underscores an important lesson for biotech investors: An approval or rejection by the FDA doesn't always translate across the pond, because each organization has unique criteria and review processes. The FDA may believe that the benefits of a drug outweigh the risks, while the CHMP may take the opposite point of view.
What will the market think?
This is a very tough call to make. According to Yahoo! Finance, shares are down almost 3% in after-hours trading, but considering that VIVUS' stock tumbled a hefty 20% back in September when the company first revealed that an EU rejection was on the cards, I would wager that this decision is already baked into price.
VIVUS' chief competitor, Arena Pharmaceuticals (NASDAQ:ARNA), is also trying to persuade the CHMP that its obesity drug merits approval. The company's therapeutic Belviq is still under review, but Arena will have to respond to a list of outstanding questions that relate to the drug's risks, and we'll have to wait a few weeks to see whether it can win the much coveted stamp of approval in the EU.
Max Macaluso, Ph.D. has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.