Arena Pharmaceuticals Inc's obesity drug disappointed investors in a second big clinical trial, sending shares plunging 33 percent on Friday from their highs on Thursday night.

While the company said the drug met its study goals, the weight-loss results fell short of a U.S. Food and Drug Administration guideline for approval of obesity treatments.

Lorcaserin's efficacy was once again underwhelming, even worse than the prior ... trial, JP Morgan analyst Cory Kasimov said in a research note.

But analysts said the data suggested the drug was safe, and that therefore it potentially could be used with other diet medicines.

The year-long trial found that obese patients taking lorcaserin twice a day, on average, lost 5.9 percent of their body weight, compared with 2.8 percent for patients taking a placebo -- a difference of 3.1 percentage points.

As they did in an earlier trial, the study results missed an FDA guideline calling for a 5 percentage point improvement in weight loss between the test drug and a placebo.

Arena said the 4,000-patient trial satisfied the FDA's alternate requirement by showing that 47.2 percent of subjects on the drug lost 5 percent or more of their weight, compared with 25 percent of placebo patients achieving that goal.

Arena plans to submit a U.S. regulatory application in December.

We met the second of those two alternate efficacy end points, said Arena Chief Executive Jack Lief. Lorcaserin allows patients to lose weight early in treatment and to stay on that treatment.

When the 10 milligram drug was taken once daily, just 40 percent of lorcaserin patients lost at least 5 percent of their weight.

Shares of Arena had soared 38 percent to $6.77 after hours on Thursday when the company announced that it would hold a conference call on Friday to discuss the trial results.

But the stock fell to $4.55 in heavy morning trading on Friday, down from Thursday's Nasdaq close of $4.91.

Arena said the incidence of side effects, like upper respiratory infection and headache, was similar between the lorcaserin and placebo groups.

The company also said lorcaserin was not associated with psychiatric side effects, such as depression and suicidal thoughts, or with heart valve problems.

That is key since lorcaserin works in a way similar to fenfluramine, which was part of the fen-phen diet cocktail before it was withdrawn in 1997 after being linked to heart valve damage.

Arena's drug is designed to block appetite signals in the brain, but by being much more selective in the receptors it affects than fenfluramine, which also binds to a separate cell receptor in the heart.

Arena plans to position lorcaserin as the the drug of choice for physicians seeking a prescription for a broad swathe of patients, said Dominic Behan, the company's chief scientific officer.

With about two-thirds of Americans classified as obese or overweight, a viable weight-loss drug is expected to have blockbuster sales.

Two other small companies, Vivus Inc and Orexigen Therapeutics Inc , are also close to filing for regulatory approval of new obesity drugs. Vivus shares were up 11 percent on Friday.

Arena's efficacy results have fallen somewhat short of those posted by its rivals, but CEO Lief said lorcaserin's benign side effect profile is a major benefit. Our side effects are very, very consistent with placebo, he said.

Looking only at patients who complied with treatment during the trial, Arena said 63.2 percent on the drug lost at least 5 percent of their weight, compared with 34.9 percent on a placebo.

Lief said Arena was continuing to seek a partner to commercialize lorcaserin and will address the topic at the appropriate time.

Not all investors were betting on Arena's success. Short interest representing bearish bets in Arena amounted to about 15 percent of its shares outstanding as of August 31.

Money managers Federated Investors and Wellington Management Company rank among the top shareholders in Arena, according to Reuters data.

Arena said it would present detailed lorcaserin trial data in October at a meeting of the Obesity Society in Washington.

(Additional reporting by Ransdell Pierson and Lewis Krauskopf; Editing by Steve Orlofsky, Lisa Von Ahn, Dave Zimmerman)

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