Cephalon Overcomes Sparlon Scare

Cephalon has been hoping to secure another advantage for Sparlon based, in part, on what another FDA advisory committee said last month. The panel voted 8 to 7, with one abstention, to recommend a black-box warning on most ADHD drugs for potential cardiovascular problems. The FDA doesn't have to follow its advisors' recommendations, and the close vote suggests there's plenty of room for debate. Sparlon wasn't reviewed by this committee.

If the agency agrees, the tougher warning would affect drugs such as Ritalin, from Novartis , and generic versions of the drug. Also affected would be Adderall and Adderall XR from Shire (SHPGY - Cramer's Take - Stockpickr) and Concerta from Johnson & Johnson (JNJ - Cramer's Take - Stockpickr).

The Shire drugs already have a black-box warning about abusing amphetamines, which can lead to heart damage or sudden death.

The panel only targeted stimulants, a group that doesn't include Strattera or Sparlon. Cephalon has been pointing to company-sponsored trials showing that Sparlon didn't cause problems with blood pressure, heart rates or heart-rhythm measurements, but the tests lasted only nine weeks.

Some analysts say that because Sparlon contains modafinil, the same ingredient in Provigil, and because Provigil has a generally mild side-effects profile, Sparlon will likely be approved by the FDA.

"Provigil has been on the market for seven years with relatively few reports of very serious neuropsychiatric issues such as suicidal thoughts," says Lawrence Neibor of Robert W. Baird & Co. in a recent report to clients.

Because modafinil "has shown relatively few problems in an adult population" for Provigil, Neibor doubts the FDA will impose a black-box warning on Sparlon. Neibor, who has an outperform rating on Cephalon, doesn't own shares. His firm doesn't have an investment-banking relationship.

A Delicate Balance

The big issue for Cephalon and Sparlon is how the FDA should act when scientific studies are contested or are ambiguous. Last month, some supporters of a black box warning for cardiovascular risk said the label could be removed if subsequent long-term tests showed there was no link to ADHD drugs. Opponents of the strictest warning said the FDA should demand more conclusive evidence.