Pharmaceutical company Vivus (VVUS) and investors waited anxiously all day Thursday for the vote of a Food and Drug Administration advisory panel on its weight-loss drug Qnexa. The vote is in, and the result is thumbs down. By a vote of 10 to 6, the panelists didn't support the drug. The vote was originally 9 to 7, but one panelist later said he voted in error.

Panelists decided that the overall risk-benefit assessment of PHEN/TPM (QNEXA) wasn't favorable enough to support its approval as a treatment for obesity.

Trading in Vivus shares is halted, but shares of rivals Arena (ARNA), which soared by as much as 35% earlier Thursday, and Orexigen (OREX) dropped sharply on the news. Arena shares closed down 8.4% but are recovering in after-hours trading, while Orexigen shares closed down 10% and continue to drop after the bell. Arena claims its drug, lorcaserin, has a better safety profile.

Safety Concerns Linger

The vote was somewhat surprising, with many market and industry analysts believing it would go the other way. But the panelists seemed to put more weight on safety concerns than was expected. Although, following the phen-fen diet drug fiasco in the 1990s -- the combination drug was linked to heart-valve damage -- perhaps it shouldn't have been.

While the FDA indeed said Qnexa resulted in significant weight loss, the panelists were concerned about the long-term effect of taking the drug, given that obesity is a chronic condition, they said, and patients may take it for years. Basically, the panel needed more safety data from Vivus than the yearlong (56-week) trial, which makes it perhaps too experimental.

The panelists also raised questions about the drug's side effects, including birth defects, depression, memory loss and increased heart rate. The FDA is set to make a regulatory decision by October 28. It doesn't have to follow the panel's recommendation, although it usually does.

Vivus says it remains confident in its obesity drug. "We are disappointed with the Advisory Committee's vote," said CEO Leland Wilson in a statement. Encouraged by the close vote and the fact the FDA recognized Qnexa's efficacy, Vivus will work closely with the FDA to address the labeling and safety questions raised during today's proceedings, he said.

Unprofitable Vivus, whose shares just about doubled in the past year in anticipation of Qnexa approval, may not have a good day Friday. In after-hours trading, the shares plunged at least 56%.

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