Orexigen: 'Bad' Rejection of Obesity Drug

LA JOLLA, Calif. ( TheStreet) --The U.S. Food and Drug Adminstration rejected Orexigen Therapeutics' ( OREX) weight-loss drug Contrave Tuesday, instructing the company that Contrave is not approvable without new a clinical trial to assess the drug's cardiac safety.

The FDA's decision is the worst-case scenario for Orexigen and will almost undoubtedly cause the stock to fall sharply once an early Tuesday trading halt is lifted. In rejecting Orexigen's Contrave, FDA went against the recommendation of an outside advisory committee which voted in December that Contrave was approvable.

"We are surprised and extremely disappointed with the agency's request in light of the extensive discussion and resulting vote on this topic at the December 7 Advisory Committee meeting," said Michael Narachi, Orexigen's CEO. Orexigen did not make public a verbatim copy of the FDA's complete response letter Tuesday.

In order for Contrave to be considered for approval again, FDA told Orexigen to conduct a new clinical trial to ensure that long-term use of Contrave does not cause heart problems in patients.

Orexigen was seeking to be the first company to receive FDA approval for a new obesity drug in years. Vivus ( VVUS) and Arena Pharmaceuticals ( ARNA) each had obesity drugs rejected by FDA last year. Vivus hopes to resubmit its drug Qnexa later this year, while Arena isn't likely to be in a position to resubmit lorcaserin until 2012.

Orexigen shares closed Monday $9.09.

--Written by Adam Feuerstein in Boston.

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