Arena Pharmaceuticals Inc withdrew an application to market its anti-obesity drug in the European Union, sending its shares down 15 percent in after-hours trading.
The European Medicines Agency's Committee for Medicinal Products for Human Use (CHMP) said certain "major objections" remain outstanding that preclude the recommendation of approval of the drug, according to the company.
European health regulators raised objections on the marketing of the drug, Belviq, in late-January, following tumors in rats, heart valve disorders and psychiatric events.
The company refused to comment on the objections raised by the CHMP but said it does not anticipate anything beyond the issues reported earlier by the regulator.
The lack of clarity on why Arena withdrew the application meant it was unclear what action the company would take to win approval and that was putting pressure on the stock, WBB Securities LLC analyst Steve Brozak said.
The U.S. Food and Drug Administration echoed similar concerns on the drug before eventually approving the drug in June 2012, the first anti-obesity drug to be approved in the United States in over a decade.
"We do not believe we can resolve the major objections related to the results of non-clinical studies prior to the CHMP's issuance of its final opinion and therefore decided to withdraw the MAA (marketing authorization application) and are evaluating the best approach for submitting at a later date," the company said in a conference call.
Belviq, known chemically as lorcaserin, is one of the two obesity drugs approved by the FDA, the other being Qsymia, marketed by Vivus Inc.
The drug, which is being developed in partnership with Japanese drugmaker Eisai Co Ltd, is designed to block appetite signals in the brain, to help people feel full after eating smaller amounts of food.
The European regulators' safety concerns are not unfounded after a similar diet-drug combo called the "fen-phen" was pulled off the market in 1997 on being linked to serious heart valve damage.
Arena's first-quarter net loss narrowed to $18.9 million, or 9 cents per share, from $26.6 million, or 18 cents per share, a year earlier.
Analysts had expected a profit of 9 cents per share, according to Thomson Reuters I/B/E/S.
Arena shares were down at $7.16 in after-market trading. They closed at $8.40 on the Nasdaq on Thursday.
(Reporting By Adithya Venkatesan in Bangalore; Editing by Maju Samuel)