Schering Drug Derailed by Power of One - TheStreet

Schering Drug Derailed by Power of One

A single patient's allergic reaction may have delayed U.S. approval by up to three years.
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OKLAHOMA CITY -- Did a single patient's allergic reaction, one that was overcome without any major complications, ultimately cripple plans for

Schering-Plough's

(SGP)

breakthrough anesthesia drug?

During early clinical trials of Sugammadex, a novel agent given to reverse anesthesia blocks within minutes, "subject 008" suffered some troubling complications. As doctors administered the drug, the patient began exhibiting a number of symptoms -- including rash, nausea and flushing -- that could signal a serious "anaphylactic" reaction.

Once doctors halted infusion of the drug, however, the patient recovered without any further treatment at all.

Nevertheless, Schering-Plough took an extra precaution that may have hurt Sugammadex's chances for U.S. approval: Despite just one patient out of about 2,000 suffering a possible reaction, the company conducted another study focused specifically on hypersensitivity to the drug.

Schering-Plough itself spotted no further problems during its expanded review. However, since the company supplied its new results to FDA experts at the last minute, the agency decided to take a closer look on its own. After scouring the databases from late-stage trials, which are designed to measure efficacy rather than risks, the FDA came up with four more cases of potential hypersensitivity to the drug.

In every one of those cases, however, the patients appeared to suffer primarily from stomach problems -- such as nausea and vomiting -- that often follow surgery regardless of the anesthesia drug involved. Moreover, in at least two of those cases, the nausea surfaced a full day after the operations had taken place and continued long after the reversal agent would have seemingly worn off.

Ultimately, FDA advisors saw no real cause for alarm.

"The various patients that (the FDA) found, vs. the ones that the company is reporting, need to be resolved," John Farrar, chairman of the FDA advisory panel, agreed back in March. "But given the fact that every drug has the potential for a person having an immune response ... it would be surprising if this drug didn't have at least one or two patients who showed up with some response that was unexpected."

The biggest surprise would come four-and-a-half months later, however, with an unexpected response from the FDA: Although its own advisory panel wound up offering unanimous support for Sugammadex back in March, the FDA followed up this month with an outright rejection of the drug.

The news was a stunning blow to Schering-Plough. While the company still boasts a richer pipeline than many of its rivals, including heavyweights

Pfizer

(PFE) - Get Report

and

Merck

(MRK) - Get Report

, it was counting on Sugammadex to become its next big hit.

TheStreet.com

contacted both the FDA and Schering-Plough in an effort to seek input for this story. As a matter of policy, however, the FDA refrains from discussing specific drug reviews. Meanwhile, Schering-Plough primarily stuck with its prepared comments on the matter.

Still, the company seemed rattled by the setback.

"Sugammadex represents the first major pharmaceutical innovation in the field of anesthesia in two decades," Schering-Plough stressed upon hearing of the FDA's move. So "we are surprised and disappointed by this action."

Others had viewed Sugammadex as a sure-fire hit as well.

Top-notch anesthesiologists had been gushing over Sugammadex for some time, in fact, with one medical journal devoting seven different articles to the drug. Meanwhile, Wall Street analysts had already started baking Sugammadex sales into their forecasts. Investors, in turn, banked on the drug's approval.

"We had gotten approval in Europe just a couple of days before that," Schering-Plough spokesman Robert Consalvo noted in a discussion with

TheStreet.com

last week. And "the applications were very similar. ... Essentially, the EMEA (European Medicines Agency) got the same package of data as the U.S."

Even Natixis Bleichroeder analyst Jon LeCroy -- an M.D. who reviewed Sugammadex's trial results at length -- felt reassured.

All told, LeCroy calculated, more than 2,000 patients received Sugammadex during clinical trials of the drug. Based on the FDA's own review, he noted, no more than eight of those patients -- or 0.03% of the total -- displayed any signs of sensitivity. Of those eight possible reactions, he continued, only three could have possibly been caused by the drug itself. Moreover, he concluded, not one of those reactions proved to be severe.

Those high hopes fell hard in the stock market. Even though analysts had pegged Sugammadex's ultimate sales at $300 million a year, investors immediately whacked more than $1 billion from Schering-Plough's market value on news of the drug's rejection.

Schering-Plough closed Tuesday down 2.3% to $20.05.

Schering-Plough blamed the FDA's rejection on lingering concerns about possible hypersensitivity to the drug. Previously, however, the agency had dwelled on another safety issue as well.

Specifically, the FDA worried that Sugammadex might interfere with the development of tooth enamel. However, as LeCroy noted before the FDA issued its ruling, the agency could have addressed this matter by simply banning Sugammadex for use in pediatric patients who make up "a small minority" of the potential market for the drug.

Even now, BMO analyst Robert Hazlett feels that market could prove huge.

For starters, Hazlett says, Sugammadex should benefit from "very positive clinical data and a lack of effective competition" once it goes on sale. Moreover, he adds, the drug looks like it can be "financially justified" to boot.

While new drugs often carry premium prices, Hazlett notes that anesthesia typically accounts for just 6% of the total costs for surgery. By shortening recovery times and freeing up caregivers for other activities, he believes, Sugammadex could actually save hospitals money down the road.

Of course, they'll have to wait a while. At best, analysts now see Sugammadex hitting the U.S. market in two to three years. The drug will become available in Europe later this year, however, where its real-world use could provide useful clues about its safety profile.

For its part, Schering-Plough says that it remains committed to winning approval of Sugammadex here in the U.S. The company hopes to arrange a meeting with FDA officials soon, in fact, so that it can discuss the issues raised in the non-approvable letter and help define a path forward for the drug. It insists that other drugs have overcome similar obstacles in the past and fully expects Sugammadex to join that group.

In the meantime, Schering-Plough continues to tout Sugammadex as a safe and effective drug that offers "an important medical advance" for patients everywhere. In some ways, at least, even the FDA seems to agree.

"It should be noted that our findings to date have not been inconsistent with those of the applicant," the agency admitted back in March. "However, our interpretation of the findings may be somewhat different" in the end.