Lorcaserin is one of three new potential obesity treatments vying to gain U.S. approval and be the first new weight-loss treatment on the market in over a decade, after initial rejections over safety issues.

Shares of Arena were up 14 percent to $3.10 in late-morning trading on Nasdaq after the FDA posted its review online.

The Food and Drug Administration first rejected lorcaserin, which is being developed in partnership with Japanese drugmaker Eisai Co Ltd, in October 2010, citing potential cancer risks.

Obesity, a leading cause of diabetes, heart disease and other serious health problems, has reached epidemic proportions in the United States with nearly a third of the population falling into the category.

The pricetag of obesity has also soared, with the condition contributing an additional $190 billion a year in healthcare costs, or one-fifth of all healthcare spending.

But the FDA has set a very high approval bar for weight loss drugs because such a large portion of the general population is likely to want to take them.

Arena resubmitted its application with more data to show that the previous findings of tumors in rats did not apply to people, which seemed to assuage some of the FDA's concerns.

The FDA documents come ahead of an advisory panel of outside experts, which will review the pill on Thursday. The FDA will make its final decision by June 27, taking into account the panel's recommendations.

LESS TUMOR, MORE HEART RISKS

The FDA staff said Arena submitted more data that showed malignant tumors in rats increased only at very high doses of lorcaserin, with rats getting at least 24 times more of the drug than the recommended dose for people.

The FDA staff said the safety margin for malignant tumors was "reassuring," but pointed out that lower doses of the drug were still linked to benign tumors in rats.

Arena has argued the findings of rat tumors did not apply to people because they resulted from high doses or biological mechanisms specific only to rodents. No increase in cancer cases was seen in people.

The FDA reviewers' main concerns seemed to be risks to heart valves seen with lorcaserin, which could be a sign of broader heart damage. Heart problems have dogged the obesity field for decades, making the FDA especially cautious about any potential problems.

Arena's lorcaserin was designed to block appetite signals in the brain in a similar way to "fen-phen," an infamous diet pill that was pulled from the market in 1997 after reports of sometimes fatal heart-valve problems.

Another diet pill, Meridia, was withdrawn in 2010 after also being linked to heart problems.

The same FDA advisory panel that is due to review lorcaserin recommended in March that all new obesity drugs need heart safety studies, even if clinical trials do not initially show evidence of increased heart risk.

Some analysts have said Arena's pill may have the lowest chance of approval, with a smaller weight loss compared to drugs from Vivus Inc and Orexigen Therapeutics Inc, meaning the FDA may be willing to accept fewer risks.

Lorcaserin helped people lose at least 5 percent of their weight compared to placebo, meeting the FDA's threshold, according to a combined analysis of three clinical trials for the drug. But if any of the trials were analyzed alone, the drug did not meet the bar, the FDA staff said.

(Reporting by Anna Yukhananov; Editing by John Wallace, Maureen Bavdek and Tim Dobbyn)

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