Orexigen Therapeutics Inc., a small California-based company, suffered a major plunge as shares fell as much as seventy-three percent in early trading. Orexigen stock lost 6.57 points to $2.50 dollars. The steep decrease came after the U.S. Food and Drug Administration declined to approve a prescription diet pill.
The weight loss drug, Contrave, failed to gain the FDA's approval. The administration required Orexigen to perform a long-term study to demonstrate that the drug does not increase the risk of cardiovascular problems such as heart attacks.
According to reports, the study could take as many as five years to complete. Expert analysts don't see a good outcome out of the situation.
"It's clearly the worst-case scenario," Lazard Capital Markets analyst William Tanner said.
There were high hopes for Orexigen's weight loss drug, which was one of three obesity drugs under U.S. FDA review. The FDA advisory panel actually voted 13-7 to recommend approval of Contrave in December.
"I don't know who would be willing to give them the dough to do this thinking that it is going to take a long, long time and what's the likelihood you are going to get an outcome that is going to satisfy the FDA?" Tanner said.
Michael Narachi, president and CEO of Orexigen expressed both shock and disappointment that the FDA did not approve Contrave.
"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," Narachi said. "We plan to work closely with the Agency to gain more information to determine the appropriate next steps regarding the Contrave application."
According to the FDA, Orexigen's Contrave was only modestly effective and was found to cause slight increases in both blood pressure and pulse.
