When the FDA approved two new obesity drugs last year, there was some surprise because of the ugly regulatory and legal entanglements of weight-loss drugs that preceded them. One of those was rimonabant, an obesity pill marketed by Sanofi ($SNY) as Acomplia and Zimulti. Fallout from that drug, which the FDA rejected and which was pulled from the European market, continues to reverberate for the French drugmaker and linger in the minds of doctors.
Sanofi has agreed to pay $40 million to settle a 6-year-old lawsuit brought by investors who said Sanofi touted the drug as a potential blockbuster when it was considered by the FDA in 2007 but had hidden clinical results about how some users developed thoughts of suicide, Reuters reports. The settlement also gets former Sanofi CEO Gerard Le Fur and another executive off the hook. The payout goes to investors who bought Sanofi's American depositary receipts from Feb. 24, 2006, to June 13, 2007, with plaintiffs' lawyers looking to get $11 million.
When the drug was approved in Europe in 2006, Sanofi believed it had a product that might eventually turn $3 billion in sales, Bloomberg reports. But it pretty quickly ran into questions about its penchant for causing thoughts of suicide. The U.K. tracked down 5 deaths over two years. When it came up for approval in the U.S. in 2007, the FDA said its benefits did not outweigh its risks. Sanofi's shares dived on the news of the rejection. The drug was pulled in Europe in 2008.
The legacy of drugs like Zimulti is that they have made doctors much more leery about using prescriptions for weight loss, a fact that has weighed on the two drugs the FDA approved last year. Vivus' ($VVUS) new diet drug Qsymia and Belviq from Arena Pharmaceuticals' ($ARNA) were thoroughly vetted by regulators but face an uphill climb--despite the oversized market. There are troubles getting reimbursement, ongoing safety concerns and a general once-burned-twice-shy feeling about them. Many doctors would rather recommend lifestyle changes to obese patients than put them on a drug these days.
As Dr. Barbara Troupin, Vivus' VP for scientific communications, said recently, "You've got this turning of the battleship to change how the medical community views obesity."