Sanofi-Aventis investors should brace for trading volatility next week when U.S. regulators reveal their review of the company's highly anticipated weight loss drug.
The French pharmaceutical company seeks Food and Drug Administration approval of Acomplia, a drug approved in Europe for fighting obesity.
The FDA is set to release its Acomplia review ahead of a Wednesday meeting at which outside experts will vote on whether it should be approved. The agency does not have to follow the experts' vote, though it often does.
The drug is considered a potential blockbuster despite hitting several regulatory bumps that have left some on Wall Street questioning its sales prospects.
"With the initial demand for Acomplia likely to be massive, the known neuropsychiatric side effects may make it difficult for the FDA to see a positive risk-benefit ratio," wrote Citigroup analyst Kevin Wilson in a Thursday note.
In recent weeks, the FDA has been widely criticized over a lag in getting new safety data about a GlaxoSmithKline diabetes drug to the public.
Analysts say that controversy might give regulators pause at approving a new drug with potentially dangerous side effects. Studies of Acomplia have shown instances of depression, insomnia and anxiety in patients who take it.
Wilson predicts that the FDA's review of the drug will likely focus more on safety than effectiveness, driving Sanofi's stock down in the first part of the week.
Sanofi originally touted Acomplia as both an anti-obesity pill and an anti-smoking treatment because it stops cravings associated with addictive behavior.
Last February, however, the FDA rejected the company's application for the anti-smoking use and said it needed more information before approving the drug to fight obesity.
The drug gained approval in the European Union soon after, but regulators there also did not approve the smoking use and limited approval to overweight patients who suffer additional health problems, including abnormal cholesterol and diabetes.
Even so, sales there soared to $20 million in the first quarter of 2007, and Sanofi said more than 130,000 people have used the drug since its European launch.
If approved in the U.S., Sanofi said it would market the drug under the name Zimulti, because FDA reviewers felt the name Acomplia could potentially mislead consumers.
Shares of Sanofi-Aventis rose 5 cents to $45.28 Friday in midday trading.