Shares of Arena Pharmaceuticals Inc (ARNA.O) nearly doubled in value after a panel of experts recommended approval of the company's obesity pill, a big step towards making it the first new diet drug on the U.S. market in more than a decade.
Arena's lorcaserin is one of the three obesity treatments that are currently trying to win approval from the Food and Drug Administration (FDA) to enter a potentially huge market, given the country's growing obesity epidemic.
Leerink Swann analyst Steve Yoo said he expects the drug to win regulatory approval and upgraded the stock to "outperform" from "market perform."
The company's shares rose 70 percent to $6.17 in morning trade on the Nasdaq. The stock touched an eighteen-month high of $7.02 earlier in the session.
Shares of rivals Vivus Inc (VVUS.O) and Orexigen Therapeutics Inc (OREX.O), which also have obesity drugs in the pipeline, were also up.
"Vivus' Qnexa will likely remain the obesity therapy of choice due to its efficacy and be first to market," Leerink's Yoo said.
"Orexigen's Contrave will not reach the market until 2015 timeframe so we do not expect the FDA advisory panel vote to impact the outlook for Orexigen much," Yoo added in a research note.
All three companies have been running the obesity race for several years and have faced rejections from the FDA on safety grounds.
However, during the advisory committee meeting on Thursday, independent advisors to the FDA said the concerns about side effects of lorcaserin, especially uncertainty about heart valve problems, could be addressed in post-approval studies.
(Reporting by Esha Dey in Bangalore; Editing by Sreejiraj Eluvangal)