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Arena shares rise on favorable diet pill review

WASHINGTON (AP) -- Shares of Arena Pharmaceuticals Inc. continued to rise Wednesday, a day after federal health regulators issued a surprisingly favorable assessment of the company's previously rejected diet pill.

The Food and Drug Administration denied approval for Arena's lorcaserin in 2010 after scientists raised concerns about tumors that developed in animals studied with the drug, among other safety concerns. The company resubmitted the drug with additional data earlier this year, hoping for a better outcome.

In a review posted online Tuesday, the FDA said new analysis submitted by the company suggests "negligible risk to human subjects," of tumors. Questions remain about the drug's effects on heart valves, an issue that frequently plagues weight-loss pills. Scientists also raised concerns that the drug can increase the risk of high blood pressure in diabetics.

On Thursday the FDA will ask a panel of outside experts to discuss and vote on the drug's safety and efficacy. The vote is nonbinding but usually guides FDA decisions. BMO analyst Jim Birchenough upgraded Arena to "outperform," on the FDA review.

"The briefing documents are clearly positive for Arena and suggest a much higher likelihood of approval than previously thought. We cannot rule out some restriction in diabetics but, in general, we believe that a positive panel recommendation is likely."

Arena shares rose 19 cents, or 5.5 percent, to $3.61 in morning trading.

Arena is one of three small drug makers racing to launch the first new prescription diet drug in more than a decade. The FDA has already rejected each of the drugs once and all three companies have resubmitted their products for a second review. Earlier this year, rival Vivus Inc. won a surprising endorsement from an FDA panel for its drug Qnexa, raising expectations for Arena and Orexigen Therapeutics Inc., the third company in the race.

Weight loss with Arena's drug was modest, with a mean reduction of 3.1 percent over a year. More than 37 percent of patients lost 5 percent of their weight or more, which was enough to meet FDA standards for effectiveness. By comparison mean weight loss with Qnexa was 11 percent, with more than 83.5 percent of patients losing 5 percent of their weight or more.