No Way? Obesity Drugs Have Side Effects

The headlines make the briefing documents for the Food and Drug Administration advisory panel reviewing VIVUS' (NAS: VVUS) Qnexa sound horrible:

"FDA raises safety concerns for Vivus diet pill"

"Vivus obesity drug has safety risks -- US FDA staff"

But the 3% increase the market awarded VIVUS today more accurately reflects the information in the briefing documents for the panel next week: No new issues is good news.

The FDA is still concerned with the oral clefs seen in babies of women taking Johnson & Johnson's epilepsy medication Topamax, one of the active ingredients in Qnexa. VIVUS doesn't need the advisory panel to say that there isn't a risk; I doubt it will, considering the data. The panel of experts just needs to conclude that the risk is low enough that educating doctors not to prescribe it to pregnant patients will solve the problem. The FDA has already lightened up on the issue, requesting a change from excluding women who are capable of getting pregnant to just those that are currently or are planning to become pregnant.

The bigger issue VIVUS might run into is the potential need for a cardiovascular outcomes trial before approval, which the FDA has put on the list of discussion points. Advisory panel members will not only have to say that a large trial isn't necessary before approval, they'll have to say it in confident and outspoken enough terms to convince the agency. An advisory panel said Orexigen Therapeutics (NAS: OREX) shouldn't be required to run one until after its obesity drug, Contrave, was on the market, but the FDA went against that recommendation, requiring a pre-approval study anyway.

Investors in Arena Pharmaceuticals (NAS: ARNA) , which will head in front of an advisory panel next quarter, should pay close attention to the panel, especially the part about pre- versus post-approval studies.

Don't misinterpret today's increase as a sign that Qnexa is more likely to be approved. VIVUS -- and Orexigen and Arena -- are still very risky considering the FDA's stance on obesity drugs. The increase was just because nothing else bad happened.

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At the time thisarticle was published Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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