Lorcaserin, Arena Pharmaceutical's (Nasdaq:ARNA) experimental obesity drug, was not necessarily the last best hope for new obesity medications, but a 5-9 panel vote against recommending FDA approval is a pretty clear indication that the standards for obesity drugs are exceptionally high. This ruling is not altogether shocking in the wake of Vivus' (Nasdaq: VVUS) similar rejection on Qnexa, but it should certainly have Orexigen (Nasdaq:OREX) shareholders feeling nervous when their company's number comes up.

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Why The Panel Said "No"
It was clear from listening to the proceedings that many panelists had issues with the efficacy and safety of the drug, as well as how Arena went about designing the trials and performing the statistical analysis. If I may be so bold, though, it sounded like at least a few panel members went in locked and loaded with a mindset against this drug and judging by their comments and concerns, it is difficult to foresee just how good a drug would have to be to get their blessing. (For more, see Arena's Big Day Looms Large.)

Frankly, the efficacy concerns seem legitimate. An average weight loss of 5.8% is not all that special and when factoring in the placebo effect it was only a 3.7% net benefit - below the FDA's stated standard. On the other hand, an argument can be made that almost any weight loss is beneficial and nearly half of people taking lorcaserin (47.5%) lost 5% or more of their starting weight (versus 20% of placebo patients). So, in a nutshell, lorcaserin helps a bit, but not a lot.

The Safety Bugaboo
Safety concerns seem to be what really spooked the panelists. There was a lot of quibbling about whether Arena's data supported the idea that lorcaserin did not increase the risk of valvulopathy (a severe side-effect that doomed an obesity drug marketed by Wyeth, now part of Pfizer (NYSE:PFE)). (Learn more in 5 Warning Signs For Bad PR Stocks.)

While Arena's data certainly looked clean, it almost appeared that the panelists wanted the impossible - for Arena to prove that lorcaserin could not/would not/did not cause this condition, and proving a negative is exceptionally difficult.

Beyond that, the risk of cancer (especially breast cancer) came up more than once. Disappointed Arena bulls may fume that the panelists were obsessing about trends seen in rats given ridiculously high doses of the drug, but the reality is that that is how these studies are generally done and panelists are always worried about cancer risks in drugs likely to be taken for long periods of time. (For more, see Can Investors Fatten Up On Weight Loss?)

Where To From Here?
Arena's stock responded quite badly to this news, but it certainly bears mention that Arena is not necessarily doomed. The FDA does not have to follow the advice of this panel. The FDA could choose to approve the drug or re-examine it again when the company has more data (the company is currently in progress with a study of lorcaserin in diabetics). Still, this is a company no other shots on goal for many years, and an uncomfortable net-cash position.

For Orexigen, this is definitely a warning shot. I felt that Arena's drug had arguably the best risk-reward trade-off, so Orexigen could have a heck of a time convincing the panelists to recommend approval of a drug with some pretty concerning side-effects. On the other hand, if Orexigen somehow makes it, the market could be all theirs (and their partner Takeda's) and a middling drug with competition could do well with the whole market to itself. (For more, see Orexigen Finds A Cautious Partner.)

The Bottom Line
In the meantime, the message from the FDA to people struggling with obesity seems to be "you are on your own". It is all well and good for the FDA to make sure potential new drugs are safe (that is its job and its mandate), but going overboard and setting a bar that no one can reach helps no one in the long run.

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