UPDATE 2-Merck ends development of obesity drug taranabant

(Adds analyst comment, background, byline; updates shares)

NEW YORK, Oct 2 (Reuters) - Merck & Co MRK.N has stopped development of its experimental obesity drug taranabant after data in a late-stage clinical study found more side effects at higher doses, the drug maker said on Thursday.

Though a potential blockbuster, taranabant had been considered a risky project because the drug comes from the same class as Sanofi-Aventis' SASY.PA Acomplia, which has failed to reach the U.S. market.

Shares of Merck, whose stock has suffered this year largely because of setbacks to its cholesterol treatments, were flat in morning trading amid a slight rise among drug stocks.

“I think expectations for the drug were pretty low across the board given what happened to (Acomplia),” said Edward Jones analyst Linda Bannister, who had not included any taranabant revenue in her financial models for Merck.

Taranabant's cancellation underscores the difficulties in developing successful medicines in the obesity field, which is littered with high-profile flameouts. Just this week, Pfizer Inc PFE.N disclosed it was exiting obesity research.

The side effects at issue with taranabant were psychiatric, including anxiety and depression, Merck spokeswoman Amy Rose said. Acomplia has been linked to suicidal thoughts and depression.

Merck still plans to present data for taranabant at a major obesity conference that begins this weekend.

“Available Phase III data showed that both efficacy and adverse events were dose related, with greater efficacy and more adverse events in the higher doses,” John Amatruda, Merck’s senior vice president and research head for diabetes and obesity, said in a statement.

“Therefore, after careful consideration, we determined that the overall profile of taranabant does not support further development for obesity.”

Taranabant and Acomplia, also known as rimonabant, work by blocking cannabinoid receptors in the brain. They are the same receptors that make people hungry when smoking marijuana.

In March, Merck released interim data from a pivotal clinical trial that showed obese patients treated with a low dose of taranabant lost a significant amount of weight, but there were side effects.

After one year, and in combination with diet and exercise, patients given a 2 mg dose lost an average of 14.5 pounds (6.6 kg), compared with 5.7 pounds for the placebo group, with weight leveling off after 36 weeks.

Amatruda said at the time that Merck intended to file this year for U.S. regulatory approval of taranabant, although the company said in its quarterly filing in July that it was reviewing its filing plans.

“Because obesity is such a huge unmet medical need, it could have been a pretty large drug if it were to have worked,” Bannister said. “But we were just always very conservative because we understood some of the potential safety issues associated with this class of drugs.”

Hopes for Acomplia, which Sanofi sells in Europe, dimmed last year when a U.S. expert panel recommended against its approval, after it was linked to rare cases of suicidal thoughts.

Merck shares were unchanged at $32.09 on morning trading on the New York Stock Exchange. The shares have slumped some 45 percent this year. (Editing by Steve Orlofsky and Maureen Bavdek)