Eli Lilly Jumps 6% on Outlook for Depression Drug - TheStreet

Shares of

Eli Lilly

(LLY) - Get Report

surged Wednesday after the Indianapolis-based drug company said the federal government had given conditional approval for its antidepressant Cymbalta.

The conditions outlined by the Food and Drug Administration include improving manufacturing conditions and procedures at plants in Indianapolis and completing negotiations on the drug label, which governs how a company can market a drug.

The letter "is good news because it confirms that Cymbalta can be approved without any additional studies," said Sidney Taurel, Lilly's chairman, CEO and president, in a prepared statement.

Lilly's stock gained 6.1%, or $3.61, to close at $63.01 -- just 19 cents below its intraday high.

This is the second time the FDA has sent an "approvable letter" to Lilly, a document that indicates the agency will approve a product once certain conditions have been met. The first FDA letter was sent in September 2002, listing the same issues to be resolved. The company submitted its Cymbalta application in November 2001.

The agency has become more aggressive in recent years, requiring companies to improve their manufacturing practices and record-keeping. Failure to meet the FDA standards can result in hefty fines and/or settlements.

"Lilly believes the FDA is in the final stages of its overall assessment of the company's manufacturing status," the company announced Wednesday. "The company expects to have clarity on this matter prior to the end of the year."

Until then, Lilly said it cannot give guidance on when the drug will be launched. Previously, it had hoped to begin marketing the drug during the first quarter of 2004.

Lilly also has been testing a form of Cymbalta as a treatment for stress urinary incontinence, which primarily affects women and can be triggered by anything from exercising to coughing or sneezing.

Four weeks ago, the company said it received conditional approval from the FDA for this use contingent upon the company's completing studies on the drug's effects (pharmacology), resolving manufacturing problems and completing label negotiations. The drug could be approved for stress urinary incontinence in late 2004 or by the first half of 2005.

The two approvable letters caused confusion for Barbara A. Ryan, a drug industry analyst for Deutsche Bank Securities. The FDA letter on Cymbalta for depression "is perplexing" because the FDA division that reviews depression drugs is asking for less information than the division that rules on incontinence medications.

"Outstanding pharmacological concerns, in our opinion, would usually be considered specific to the drug -- not the indication -- and so the mixed, inconsistent signals from FDA are difficult to rationalize," Ryan said in a Wednesday research report to clients. Still, she considered the news positive, but not positive enough for her to change her hold rating on the stock. She doesn't own shares, but her firm has had an investment banking relationship with the company within the last year.