Diet drug Alli under FDA investigation due to liver damage

I remember all the hype that surrounded the release of the first FDA approved over the counter diet drug, namely Alli. At that time, I guess GlaxoSmithKline (NYSE: GSK) experienced a welcomed surge in their share price. I wonder what’s going to happen now, when the news of 32 users experiencing liver damage hit the net.

If you are in the stock market you know that a press release may have a huge influence on the price of a security. Of course, talking about a big company like GSK, the news is probably going to be swept under the rug. Already FDA took position defending the drug by saying that “No definite association between liver injury and orlistat [the generic name for the drug] has been established.”
At the same time, GSK said overweight or obese people are predisposed to liver related disorders, and ‘there is no evidence that Alli causes liver damage’.
However, FDA is required to investigate the claims.

Keep in mind that earlier this year, the FDA nixed the sale of another promising weight loss pill, rimonobant, because of concerns over mental health issues and suicidal thoughts. Rimonobant is a cannabinoid receptor. (Should I say more about the ‘benefits’ of smoking marihuana?)
Manufactured by Sanofi- Aventis and sold under the name Acomplia, it has been authorized in July 2007 by European Medicines Agency (EMEA) and is marketed in 13 European countries. However, it’s not been considered safe enough for sale in the United States. Somehow Alli stood a better chance. Or maybe Glaxo had better lobbying skills. Or maybe Sanofi decided to stop using Bristol-Myers Squibb to market Acomplia in the United States, as they have previously done for two of Sanofi’s best-selling drugs- the blood-thinner Plavix and the blood pressure pill Avapro. According to some rumors, Bristol-Myers took about half the drugs’ American profits.

Until FDA and GSK are doing the typical damage control, the demand for Alli is expected to drop, along with Glaxo’s revenue for the sale of the drug.

Today GSK closed at $39.15, down $0.29 from yesterday. After hours market showed an increase of $0.11 (shorts kicking into action?) to $39.26.

Note: I have no idea who in their right mind would even attempt to use Alli considering that GSK warned about the very unpleasant side effects including soiling your pants if you eat too much fat.

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