saw its shares sag Tuesday on the heels of disappointing regulatory news about the French company's experimental drug Acomplia.
On Friday, after the markets had closed, Sanofi-Aventis said the Food and Drug Administration rejected Acomplia as a smoking-cessation treatment and gave conditional approval for the drug as a weight-loss medication.
In a three-sentence press release, the company didn't identify the conditions or set a timetable for meeting the conditions. "Sanofi-Aventis will continue to work in close collaboration with the FDA," the company said.
U.S. investors, coming off a long holiday weekend, choked on the news, sending the stock down 2.7% to $43 by midafternoon on triple the average daily volume for the last three months.
Conditional approvals, known as "approvable letters," aren't rare, especially if a product, such as Acomplia, is the first of a new class of drugs.
If approvable letters require more information about existing data or greater discussions about a drug's label, the FDA's clearance can be granted in several months. But if the agency wants more clinical testing, the delay could last for several years.
The FDA's action creates "substantial uncertainty over what is considered Sanofi's most important pipeline asset," says Alexandra Hauber of Bear Stearns in a Feb. 20 research report. "The next steps are difficult to handicap in the absence of further information from Sanofi."
Hauber has a peer-perform rating on the stock. She doesn't own shares, but her firm has had a recent noninvestment-banking relationship with the company.
Company executives can expect a grilling from analysts on Friday when they present fourth-quarter and full-year 2005 financial results
and, perhaps, offer guidance for 2006.
Until then, analysts are doing their best to read the tea leaves. Hauber noted that the company, in its statement, referred to Acomplia as a "weight management" drug. This definition "doesn't bode well for an indication beyond weight loss, such as a treatment for metabolic syndrome," she says.
Metabolic syndrome refers to several health problems -- too much fat around the waist, increased blood pressure, high blood-sugar, low levels of "good" cholesterol and high levels of triglycerides -- that increase the risk of diabetes, heart attack and stroke.
When Sanofi-Aventis announced in June that the FDA had accepted Acomplia for review, it said the compound "is thought to represent a new approach for the comprehensive management of cardiovascular risk factors." The company continues late-stage clinical testing of Acomplia in diabetics and results may be available later this year.
Another analyst trying to decode the company's press release is Tim Anderson of Prudential Equity Group, who says he had expected an approvable letter for weight loss and a second-quarter launch. Now, he says, "a second-half launch is more likely."
Anderson, who is neutral on the stock, said in a Tuesday research note that the FDA "most likely wants additional data from a specific subpopulation of obese patients."
Such information, he adds, "should be able to be generated before the end of the year from one or more ongoing
clinical trials." However, he adds that the FDA could require the drug to be reviewed by a panel of outside experts before the agency acts.
Anderson doesn't own shares, and his firm doesn't have an investment banking relationship.
Weight and See
Anderson wonders if a recent editorial in
The Journal of the American Medical Association
played any role in the FDA's action. "FDA has previously proven itself to be sensitive to public scrutiny," he says.
Last week, the editorial accompanied a company-sponsored clinical trial that compared Acomplia with a placebo in more than 3,000 patients. Those who dieted and took Acomplia for two years experienced "modest but sustained reductions in weight and waist circumference and favorable changes in cardiometabolic risk factors," the research says.
However, the authors said this test was "was limited by a high drop-out rate," adding that "longer-term effects of the drug require further study." The article covers research that was first presented at an American Heart Association convention in November 2004. Only about half of the participants in the placebo and Acomplia groups stayed with the study.
The caveats identified by the researchers -- the two lead authors have received fees from Sanofi-Aventis for making presentations -- were amplified by the
editorial. It raised questions about the drop-out rate, about tracking patients who quit and about balancing possible side effects vs. the "modest" weight loss.
Sagient Research Systems speculates the FDA's delay could have been caused by safety issues.
"Acomplia had a higher rate of psychiatric adverse events, and the nature of serious adverse events has not been fully disclosed," says the San Deigo firm, whose BioMed Tracker report analyzes drug products and prospects. "There is a high prevalence of depression in obese patients, and significant depression was an exclusion factor. This could be important since it may in practice be difficult to restrict Acomplia usage once it is on the market."
When and if Acomplia is approved for weight loss, it would compete with two prescription drugs, Xenical from
and Meridia from
Meridia had worldwide sales of $300 million. Xenical produced about $485 million in sales worldwide, including only $78 million in the U.S. for Roche, which has granted a license to
to market the drug as an over-the-counter medication.
an FDA advisory committee voted 11-3 in support for Xenical as a nonprescription product. If the agency concurs, Xenical will become the first FDA-approved over-the-counter weight loss drug and will be sold under the name Alii.
The rejection of the smoking-cessation application gives breathing room to the assortment of nicotine gums, pills and skin patches already on the market. But the biggest beneficiary may be
, which is working on a stop-smoking drug called Champix.
In December, the FDA granted an accelerated review for Champix, which means the agency expects to act within six months. Pfizer also submitted an application to the European Union in November.
Hauber, of Bear Stearns, says Champix might have a research edge anyway because it was tested vs. Zyban, from GlaxoSmithKline, while Acomplia was only tested vs. the placebo. Champix had a statistically significant advantage over Zyban in terms of patient quit rates, Hauber says.
The FDA's rejection of Acomplia as a stop-smoking drug doesn't kill all chances of a comeback. Sanofi-Aventis will probably have to conduct more clinical trials, and if Acomplia is approved for weight management doctors are allowed by law to prescribe it for any condition.