Court Overturns FDA Approval of Generic Cancer Drug

A federal appeals court decides that permitting a generic version of Bristol-Myers' Taxol was wrong.
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A federal appeals court ruled Tuesday that U.S. drug regulators were wrong to approve for sale generic versions of

Bristol-Myers Squibb's

(BMY) - Get Report

top-selling cancer drug, Taxol.

The court ruling sent shares of

Ivax

(IVX)

lower in Tuesday trading because it sells a generic form of the drug. Ivax fell $2.15, or 11%, to $17 per share. Trading has been halted in Ivax because of the news.

On the other side, Bristol-Myers shares jumped $2.73, or 5%, to $56 per share.

The federal Court of Appeals for the District of Columbia said the decision made by the Food and Drug Administration to allow the sale of generic Taxol was "arbitrary and capricious and must be vacated."

The problem, of course, is that the cheaper, copycat versions of the popular cancer drug have been on the market for about a year. Despite its ruling, the court gave no clear indication about what steps the FDA should take next.

"We frankly do not know what recourse is left to the FDA or other governmental agencies to take any steps that would affect the marketing of generic versions of Taxol," the ruling states.

The stakes in this case are high. During the third quarter, Bristol-Myers said brand-name Taxol sales fell 33% to $279 million because of generic competition.

Ivax profits during the third quarter doubled to 30 cents per share, helped along by sales of generic Taxol, the company said, although it refused to disclose actual revenue figures for the drug, known as paclitaxel.

Mylan Labs

(MYL) - Get Report

was also trading lower Tuesday, possibly because it sells a generic version of another top-selling Bristol-Myers drug, BuSpar. An initial court decision released earlier this year allowed Mylan to sell a copycat version of the antianxiety drug, but a recent appeals court decision seemed to favor Bristol-Myers.