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Cephalon Drug May Be Delayed

Robert Steyer

Cephalon's (CEPH Quote) shares slipped Thursday after the company said there might be a regulatory delay for its sleep-disorder drug Nuvigil.

Though the Food and Drug Administration is supposed to act by year end, the decision could be pushed back. The hold up isn't related to safety or effectiveness, but instead relates to negotiations on the wording of the label.

Cephalon said it's collecting extra information sought by the FDA and will submit it "within the next few weeks." Company executives said they were pleased with their discussions with the FDA even as the stock closed at $73.81, down $1.06, or 1.4%. The shares dropped as low as $73.03.

The company said its previously announced guidance for fiscal 2007 "will remain in effect, notwithstanding any delay" in the FDA review. Sales are expected to be $1.68 billion to $1.72 billion. Earnings, excluding stock-based compensation expenses, are forecast at $4.50 to $4.60 a share.

The label issue is complex because the FDA wants information about another Cephalon drug, one that was rejected by the agency, included in Nuvigil's label. At issue is modafinil, the ingredient in Nuvigil, which will be prescribed for adults. A stronger dose of modafinil was the ingredient in Sparlon, an experimental Cephalon product for treating attention deficit hyperactivity disorder in children.

An FDA advisory committee voted against Sparlon in March, even though it said the drug was effective. The agency formally rejected the drug in August, and Cephalon halted work on Sparlon.

The FDA wouldn't approve Sparlon because of a report about one child in a clinical trial experiencing a suspected rare skin disease called Stevens-Johnson syndrome. The condition, caused by a reaction to some drugs, can be fatal.

Cephalon officials investigated the matter and sent information to the FDA, concluding that the child had a virus-induced rash. They also provided reports by the child's doctors and consultants who reviewed medical records and photos. They said the child was never hospitalized and didn't miss any school.

While Cephalon was appealing the Sparlon case, the agency also was reviewing Nuvigil. On May 1, the FDA gave conditional approval to the drug, but held off on final clearance until an agreement could be reached on what the Nuvigil label would say.

Although the medication's approval may be delayed, "we see this as an important opportunity to ensure that the final label for Nuvigil reflects the actual medical condition of this child," said Dr. Lesley Russell, a Cephalon executive.

Cephalon wants Nuvigil approved for several sleep disorders, including the neurological disease narcolepsy and shift-work sleep disorder, which affects people who can't get used to constantly changing work hours.

In about three years, Cephalon will begin encouraging patients to switch to Nuvigil from its cousin Provigil, the company's best-seller. Strategically, Cephalon wants patients using Nuvigil before generic copies of Provigil hit the market.

Provigil also contains modafinil. The current label says post-marketing accounts have included "rare reports of serious skin reactions," including Stevens-Johnson syndrome.

Because alleged side effects are reported voluntarily "from a population of uncertain size," the label says "it is not always possible" to assess cause-and-effect or the frequency of side effects. A revised Provigil label will include the same information that's delaying FDA approval of Nuvigil.