Weight-Loss-Drug Maker Vivus Soars on FDA Panel Review

Vivus (VVUS) shares are trading around 15% higher Tuesday after U.S. Food and Drug Administration reviewers said its weight-loss drug Qnexa indeed helps reduce weight. Shares of rivals Orexigen (OREX) and Arena (ARNA), which have competing drugs, are also soaring over 21% and 9%, respectively.

A panel of experts is scheduled to review Vivus' potential blockbuster drug on Thursday, with the FDA making a regulatory decision in October. While the FDA acknowledges the drug's effectiveness in cutting weight, Qnexa will certainly draw scrutiny over its side effects. The FDA wrote in its review that "Given two-thirds of adults are either overweight or obese, Qnexa could have widespread use, and the potential for safety issues cannot be dismissed."

Regulators will no doubt take safety into special consideration following the phen-fen fiasco in the 1990s. Fen-phen combined two drugs, fenfluramine and phentermine, but was pulled from the market in 1997 because it was linked to heart-valve damage and lung problems. Since Qnexa also combines phentermine, but with topiramate, the FDA staffers repeatedly mention the 1997 withdrawal from the market of the phen-fen drug.

"Approval of Qnexa should take into account the safety profile not only of the combination product, but the individual components as well," the agency writes.

Several Points to Ponder

Specifically, the reviewers want to evaluate possible cardiac and general disorders, metabolic issues, nervous system and psychiatric side effects, such as depression, memory and concentration lapses. They'll also examine ophthalmic disorders, renal and respiratory problems. They're concerned as well about the lack of data on the potential impact on pregnant women. Safety associated with long-term use is another concern.

Yet, with 68% of adults in the U.S. overweight, as Vivus writes in its review, the drug is clearly needed. "Qnexa is highly effective for weight loss across a broad population of obese subjects," Vivus writes. Indeed, the drug met key goals in several studies, cutting between 13% and 15% of patients' body weight. Vivus adds that "treatment was safe and generally well tolerated by overweight and obese subjects."

If Qnexa is approved, annual sales may reach $620.9 million by 2015, according to Christopher James, a senior equity analyst at McNicoll Lewis & Vlak in New York, Bloomberg reports. Aside from Qnexa, the FDA is set to review Arena's lorcaserin in September, and Orexigen's Contrave in December.

Less Smoking but More Fat

Vivus reminds reviewers that obesity is associated with numerous diseases, including heart problems, stroke, cancer and type 2 diabetes. Vivus also cites a recent study that suggests that the rise in obesity "will negate the gains in health benefits achieved through the reduction in smoking rates." And Americans have been getting fatter.

Obesity costs the U.S. as much as $147 billion annually in health care, according to a 2009 study from nonprofit RTI International and the Centers for Disease Control and Prevention. The FDA will be weighing the risks and benefits considering all these facts.