Regulatory Obstacles for Obesity Drug Weigh on Biotech

Brittney Barrett  |

For the weeks leading up to the European Congress on Obesity meeting held May 25 to May 28, the biotech sector was abuzz with speculation surrounding the companies presenting new treatments. Among the promising options was leading developer, Orexigen Therapeutics(OREX). The company’s diet drug; Contrave; however, encountered regulatory difficulties today. After failing to sell the FDA on a new regulatory plan for its obesity drug Contrave, the San Diego-based biotech announced it would put its stateside obesity programs on hold. The news led shares of Orezigen down over 30 percent, pushing shares of companies with similar drugs in their pipeline down the tubes with it.

Orexigen has played up the virtues of Contrave for several months, in spite of considerable regulatory obstacles. In December, U.S. regulators denied approval to Contrave, demanding more exhaustive clinical trials on potential cardiovascular risks. Orexigen countered that the FDA’s request was unprecedented and would “generate significantly more information than is necessary or feasible.”

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Regardless of their objections though, the regulators insistence have derailed the product and today, investors feared other drugs with similar intentions will meet a similar end. Shares of companies offering products for a similar purpose, including Vivus (VVYS) and Arena (ARNA), fell alongside the news. The weakness of Vivus and Arena; however, cannot be pinned entirely on the Orexigen difficulties. Both pharmaceutical makers have experienced regulatory hurdles of their own.

While the biotech outfits shilling obesity drugs fall following disappointing progress at the meeting, another portion of the sector pushed higher in advance of the meeting of the American Society of Clinical Oncology. Set for Chicago this weekend, cancer drug-makers often see their stocks balloon.

Oxigene Inc. (OXGN) was a top beneficiary of the hype, pushing up 25 percent in anticipation of two separate presentations for its cancer-fighting agent, Zybrestat scheduled for the annual gathering. A study from the clinical trial of Zybrestat, which focuses on treating lung cancer, will be presented on Saturday.

Elsewhere in the sector, Pharmasset Inc. (VRUS), which is currently in the late trial stages of a hepatitis C drug, saw shares appreciate significantly after Citigroup increased their price target from $71 to $200. Analysts reportedly suspect its hepatitis C drug could receive regulatory approval ahead of schedule.


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