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Diet Drug Decision Shows Why Drug Makers Have Kept Distance

By Thomas Gryta Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- The U.S. Food and Drug Administration's rejection of the latest diet pill shows the high bar for such treatments, proves why large drug makers have kept their distance from the space and leaves the nation without a new treatment for one of its biggest health problems. The agency's rejection Tuesday of Contrave--being developed by Orexigen Therapeutics Inc. (OREX) in partnership with Takeda Pharmaceutical Co. (TKPYY, 4502.TO)--comes as a surprise because an agency panel already recommended approval, but the broader FDA wants a safety-related study that is likely to span years. Obesity is widespread and a risk factor for many serious health issues, but no new treatments will be coming on the market anytime soon. Vivus Inc. (VVUS) and Arena Pharmaceuticals Inc. (ARNA) had their respective drugs rejected in October, and both had additional setbacks in recent weeks when the FDA asked for additional information on their safety. The FDA's concerns about the long-term cardiovascular risks of Contrave, and wanting a clinical trial to address those worries, are paired with its inquiries about the other candidates: about birth defects and cardiovascular risk from Vivus' Qnexa, and about cancer and heart-valve problems from Arena's lorcaserin. The rejection of Contrave, which is a combination of two drugs that have been on the market for decades, sends a message that companies will need to run trials that prove their drug doesn't have long-term side effects before approval. "It is a devastating piece of news for the company and for future development of anti-obesity drugs," said John Fraunces, managing partner at Synaptic Capital Group, who has owned all three stocks to various degrees but doesn't currently own any shares in the space. "That just makes an already expensive clinical program that much more expensive for future companies to have to go through," Fraunces said. The difficulty of proving the long-term safety of a drug that will be taken by millions of people, many with no obvious health problems, has kept many companies and investors out of the space. Rodman & Renshaw analyst Elemer Piros said large studies could be hard to conduct with an obesity drug, because the long-term effectiveness of the drugs isn't strong enough to make people stay on them for years. He notes that the drug would be taken by relatively healthy patients, so the FDA isn't going to take any chances with serious side effects. Many companies--including Pfizer Inc. (PFE) and Merck & Co. (MRK)--have killed late-stage programs, and Abbott Laboratories (ABT) removed Meridia from the market last year because of cardiovascular risks. Smaller companies don't have the resources to sell weight-loss drugs and need to find larger partners to help in the effort, but a search by Arena and Orexigen both ended with Japanese drug makers that are looking for new products to fill their pipeline and made relatively small upfront payments. Vivus has said it will wait until approval to find a partner. As the hurdles become clearer, or are reinforced, and the disappointments pile up, the area may not attract many investors at any level. "The safety hurdles make it a really hard investment proposition," said Bryan Roberts, a partner at venture-capital firm Venrock. He believes that the FDA is concerned about the people who will take a weight loss drug, but don't medically need it. Piros believes that the danger of such wide access may lead the potential obesity-treatment market to become fragmented, with a company attempting to target a segment of the population--for example, obese patients with depression--in order to get to the market and then try to extend the approval into wider use. -By Thomas Gryta, Dow Jones Newswires; 212-416-2169;

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