Schering Regroups After FDA Rejection

OKLAHOMA CITY -- When European regulators approved Schering-Plough's (SGP Quote) groundbreaking anesthesia drug late last month, investors assumed that the U.S. Food and Drug Administration would bless the drug as well.

That turned out to be a mistake. Just two days after the action in Europe, the FDA ignored its own expert advisors and rejected the drug.

Although the agency agreed that Sugammadex worked just fine, it felt so concerned about potential allergic reactions, which barely surfaced during clinical trials, that they issued a "not-approvable" letter that could delay Sugammadex's introduction to the U.S. market for years.

"We view today's delay (not-approvable letter for a drug targeting an unmet medical need following a unanimous panel vote) as yet another incidence of the high level of FDA conservatism facing the pharma group," JP Morgan analyst Chris Schott declared late last month. "Over the past two years, roughly 50% of FDA (drug applications) have had a worse-than-expected outcome."

Unfortunately, Schott concluded, "we do not expect this trend to improve in the near term."

Despite the FDA's rejection of Sugammadex, Schering-Plough still boasts four different blockbusters and its strongest pipeline in years. Due to tough conditions here in the U.S., however, the company fully expects to sell most of those drugs tht are designed to treat everything from arthritis to schizophrenia far away from home.

Merck's (MRKc Quote) 2004 withdrawal of Vioxx, a once-popular painkiller linked to heart problems, changed the landscape for the entire pharmaceutical industry.

The FDA has grown increasingly wary of approving new drugs that might pose safety risks. Meanwhile, U.S. customers have stopped taking some popular blockbusters that have been on the market for years.