It's been clear for some time that the Food and Drug Administration isn't particularly fond of obesity drugs. It pulled Abbott Labs' (NYSE: ABT) Meridia off the market and subsequently rejected the approval of three more.
Now it's just being a bully.
Orexigen Therapeutics (Nasdaq: OREX), one of the three companies whose drugs were recently rejected, met with the FDA to gain further clarity on what it needs to do to gain approval of its obesity drug Contrave. You'll recall that the FDA wants Orexigen to run a clinical trial to determine the theoretical cardiovascular risk for Contrave.
As a result of that meeting, Orexigen believes that it would have to run a clinical trial with 60,000 to 100,000 patients to adequately show that the drug doesn't increase cardiovascular risk.
That's right -- 100,000 patients!
That's not even feasible for big pharma, let alone a small company like Orexigen. Cardiovascular drugs such as Merck's (NYSE: MRK) vorapaxar and GlaxoSmithKline's (NYSE: GSK) darapladib, which try to reduce heart attacks and strokes, enroll only 30,000 to 40,000 patients across their entire phase 3 programs. Unfortunately it's a lot harder to prove that the treatment and placebo groups are the same than it is to prove that there's an improvement in the treatment group.
As if the necessary size wasn't bad enough, the FDA said the trial requirements were subject to change after an advisory committee meets next year to discuss cardiovascular assessment for obesity drugs. Do I hear 200,000?
I warned Fools that the news could be bad, but even I wasn't expecting that it would be this bad.
Orexigen plans to appeal the decision to the higher-ups at the FDA, but in the meantime, it's putting its U.S. obesity-drug development on hold. Shares are down 30% today, which is completely warranted given the uncertainty.
VIVUS (Nasdaq: VVUS) also trended down today. Elevated heart rate in some patients was one of the issues the FDA cited when it turned down VIVUS' obesity drug, Qnexa.
Without any heart issues, Arena Pharmaceuticals (Nasdaq: ARNA) held up OK today. But investors should keep in mind that bullies have multiple ways to torment others.
Fool analysts think the government will be kinder to these companies. Grab the free report "Too Small to Fail: 2 Small Caps the Government Won't Let Go Broke" to find out which ones.
