Vivus Inc said its obesity drug, the first diet pill launched in the United States in over a decade, is unlikely to be recommended by a European regulatory committee, sending its shares down 14 percent.
Safety issues associated with earlier obesity drugs, such as the notorious "fen-phen" diet-drug combo, led to health regulators being cautious with approving such pills.
"An eventual approval in EU seems problematic, given that the issues raised by (the EU committee) seem more related to the lack of comfort with phentermine in Europe, rather than the data itself," Cowen and Co analyst Simos Simeonidis said.
"A situation that we view as difficult to ameliorate."
Like fen-phen, Vivus's Qsiva also contains the appetite suppressant phentermine in combination with the anti-seizure drug topiramate.
An earlier obesity pill, Acomplia, launched in Europe had to be withdrawn by its manufacturer Sanofi in 2008 due to an increased risk of suicide.
A formal decision on Qsiva from the European Medicines Agency's Committee for Medicinal Products for Human Use is expected following its October meeting, Vivus said on Friday.
If a negative recommendation is issued and depending upon the issues raised, Vivus said it would either resubmit its marketing application at a later date or appeal the decision and request a re-examination.
Vivus's President Peter Tam said the committee raised questions on both the drug's safety and efficacy, as well as the company's risk minimization plans.
"The largest impact on Vivus is that it may remove at least some of the acquisition premium assigned by some investors, since a lack of ex-U.S. revenue makes an acquisition by a large pharma less likely, albeit possible," Cowen's Simeonidis said.
Vivus's drug was approved by the U.S. Food and Drug Administration in July under the brand name Qsymia. The regulator had earlier in June approved Arena Pharmaceuticals Inc's Belviq, the first diet pill to win approval in 13 years.
While Vivus launched Qsymia in the United States on September 17, Arena is expected to launch Belviq early next year.
Vivus shares, which touched a low of $20.35, later recouped some of their losses to trade down 11 percent at $21.10 on the Nasdaq on Friday.
Arena shares were up 4 percent at $9.15 on the same exchange.
(Reporting by Esha Dey and Vrinda Manocha in Bangalore; Editing by Roshni Menon, Anthony Kurian)
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