FDA Panel Rejects Cephalon's Sparlon

Updated from 6:07 p.m. EST

Cephalon's (CEPH - Cramer's Take - Stockpickr) drug for attention deficit hyperactivity disorder was rejected in a stunning decision by a panel of medical advisers to the Food and Drug Administration.

The advisory committee said Thursday the ADHD medication Sparlon needed more tests to assure safety against a rare and potentially fatal skin disease, even though the experts said the drug was effective. Additional tests could add at least a year to the regulatory process.

The advisory committee voted 12-to-1 against recommending Sparlon's approval, citing its concerns about Stevens-Johnson syndrome, a rare and vicious blistering of the skin that can be caused by certain drugs. The FDA isn't bound to follow its advisers' recommendations, but it usually does so.

"We are obviously disappointed with the recommendation of the advisory committee," said Dr. Paul Blake, Cephalon's executive vice president for worldwide medical and regulatory operations. "We will continue our discussions with the FDA to determine the next steps in the review of this drug application."

In September, an FDA staff member called attention to one case of the rare disease and two other cases of severe skin rash. He recommended that Sparlon be rejected. One month later, the agency granted Cephalon conditional approval for Sparlon, asking the company to provide more data on the skin problems and several other matters.

The advisory committee's decision is a major blow to Cephalon, which was seeking FDA approval for Sparlon to treat children ages 6 to 17. Cephalon's stock was halted Thursday while the panel deliberated, and the decision came after the markets had closed. A dramatic decline in its shares can be expected when trading resumes Friday.

The panel's ruling concluded two days of FDA hearings -- on Wednesday another advisory committee examined ADHD drugs in general -- and several roller-coaster weeks for Cephalon.

The Frazer, Pa., company's stock has bounced from the low $70s, to the low $80s, to the mid $60s and back to the low $70s as bits and pieces of clinical research and FDA analysis have become public.