After the FDA rejected the drug, which was to have revived Merck’s cholesterol franchise, its shares plunged. The pill contains an extended-release form of niacin, which is a vitamin, and a chemical called laropiprant to stop flushing, a common reaction to niacin. But the drugmaker offered no insights into the rejection, leaving Wall Street to speculate - and the speculation isn’t optimistic.

In an investor note this morning, Catherine Arnold of Credit Suisse writes that the “laropiprant component of Cordaptive presumably had cardiovascular signals. Even though this may have been in very small numbers, the FDA was unable to get past the notion that Merck couldn’t explain why it happened in some patients and not in others, while the potential target population is large.”

She goes on to say the “FDA risk/benefit analysis must have given more weight to theoretical risk and possibly a small rate of actual cardiovascular events. The non-approval may have been cemented by the backdrop which includes the commercial availability of other niacin options and only small differences in study discontinuations favoring Cordaptive.’

And Arnold notes that cardiovascular signals weren’t evident in studies comparing Cordaptive versus a combination of niacin and Zocor, “we do not know if there was a signal in the monotherapy (laropiprant alone) studies, as these are not publicly available.” Here’s a study for background reading.

The upshot: New multi-year studies may be required, because an existing study called HPS2-Thrive won’t evaluate the effect of laropiprant on reducing or increasing cardiovascular signals compared with niacin alone. So Arnold sees this “potential higher burden” a good reason to push out her forecasts for Cordaptive and a combo of Cordpative and Zocor until 2012, at the earliest.