U.S. health advisers narrowly rejected Vivus Inc's experimental weight-loss pill, saying there was not enough data to merit approval.
In a 10-6 vote, a Food and Drug Administration advisory panel said they were concerned that Qnexa was too experimental. Earlier the official vote was reported as 9-7 but one panelist later said he voted in error.
Approving the drug would be a huge public health experiment, said panelist Elaine Morrato of University of Colorado.
The decision stunned investors, who had bet safety concerns would not keep the drug from market.
Vivus' stock was halted on Thursday, pending the panel decision, but shares of rival drugmakers Arena Pharmaceuticals Inc and Orexigen Therapeutics Inc sank after the vote.
FDA will weigh the advisers' vote before making its final decision, expected by October 28
Vivus is seeking FDA's green light to sell Qnexa to adults to use once a day to slim down in it hopes could become the first prescription diet drug in a decade. The company told advisers its pill offers a safe option for shedding pounds and improving their health.
There is little doubt the drug works, but panelists said potential side effects such as depression, memory loss, increased heart rate and birth defects are a worry.
Panelists were also concerned since patients may take Qnexa for years but Vivus only studied it for about 12 months.
The reality is when they go off (the drug) they gain the weight... This is likely a lifelong therapy, said panelist Dr. Lamont Weide of the University of Missouri School of Medicine.
The stakes are huge for Vivus, which has not had a U.S. product approved since 1996. Its shares have jumped more than 100 percent over the last 12 months with investors buoyed by the potential market in a nation where two out of every three Americans is overweight or obese.
The panel's vote may also offer clues on the potential for two rival drugs from Arena and Orexigen.
Arena shares fell more than 8 percent after the vote, reversing earlier gains. Orexigen fell more than 14 percent.
(Additional reporting by Susan Kelly in Chicago; editing by John Wallace, Andre Grenon and Tim Dobbyn)