The U.S. Food and Drug Administration (FDA) has approved the first obesity drug in 15 years. The drug is lorcaserin, dubbed Belviq, from Arena Pharmaceuticals (ARNA).

The drug works by affecting the area of the brain that regulates metabolism.

The issue with weight loss drugs has not been efficacy, rather the side effects.  The drug from Arena works similarly to Fen-phen.  Fen-phen was banned about 15 years ago in the aftermath of serious side effects related to heart valves.

The drug will be marketed by a Japanese company,Eisai.  Projections are that lorcaserin will become a $1.5 billion drug.

Jack Lief, Arena’s president said. “The FDA approval of Belviq is an important development for patients who struggle with obesity or are overweight with comorbidities and need help with chronic weight management beyond diet and exercise.”

“Belviq represents an important therapeutic option for physicians responsible for the medical management of their patients who are overweight or obese,” said CEO Lonnel Coats.

Arena stock was up 36% to $12.04 just before 2:00 p.m.

The two sympathy plays are Vivus (VVUS), up 9%, and Orexigen Theraputics (OREX), up 28%.  Both of these companies are trying to bring their own obesity drugs to the market.  The speculation is that FDA’s approval bodes well for Qnexa from Vivus and Contrave from Orexigen.  Some speculate that Qnexa will do better than lorcaserin.

Caution is warranted as there is no guarantee that Vivus and Orexigen will also get approvals.  Caution is also warranted in buying shares of Arena as after the open most of the good news will be reflected in the share price…Read more at Forbes