The future of the obesity drug business took a hit on Tuesday when the last of a slate of three proposed new diet drugs, Orexigen's (OREX) Contrave, was rejected by the Food and Drug Administration due to concerns over heart problems, despite having been the only one of the three recommended for approval by the FDA's advisory panel.

Shares in the California-based company, which closed up 9.25% Monday at $9.09 in anticipation of an approval of the first diet pill in decades, tanked by some 72% trading at around $2.60 by midmorning.

The FDA is concerned enough about the cardiovascular safety profile of Contrave when used long-term in a population of overweight and obese people that it's requiring Orexigen to conduct yet another study to address the issue. The FDA wants a "randomized, double-blind, placebo-controlled trial of sufficient size and duration." That will be neither easy nor cheap.

"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," said Michael Narachi, president and CEO of Orexigen. While Orexigen and its partner Takeda appeared ready to continue -- at least for now -- such an undertaking may not be feasible.

Three Similar Diet Drugs, Three Different Health Concerns

The diet drug business has grown tougher over the years, especially in the wake of the phen-fen fiasco of the 1990s, when that combination treatment was linked to heart-valve damage and lung problems. In October, Abbott's (ABT) Meridia was pulled from the market because of safety concerns.

The recent obesity drug saga began a few years back, when three companies began a race to be the first on the market with similar new obesity drugs: Vivus (VVUS) with Qnexa, Arena (ARNA) with lorecaserin, and Orexigen with Contrave. Qnexa and lorecaserin were ahead in the FDA's process, and after both failed either to receive the backing of the advisory panel or to get approved, investors put their hopes in Contrave, especially after the advisory panel voted 13-7 to recommend approval, saying that a study of potential cardiovascular risks could wait after approval.

Now, instead of reaping projected sales of hundreds of millions of dollars, all three companies will have to spend more money before resubmitting their drugs to FDA scrutiny. But while Orexigen is facing another long and expensive drug trial, as of now, Vivus and Arena only have to submit more data. Vivus was asked to do data analysis on potential birth defects of Qnexa, and is expected to resubmit the drug some time in 2011, while Arena has to resubmit data on potential cancer risks from lorecaserin, which it will probably do by the end of the year.

Though the FDA is putting consumer safety first, some are concerned that the agency may be going too far, especially considering the rise in obesity in the U.S. In December, Jennifer Lovejoy, president of The Obesity Society, said, "We are deeply concerned about the effect that the FDA's recent decisions will have for on-going and future research into desperately needed new obesity treatments. ... we hope that the agency will assure a balanced process, taking into account the urgent medical need."