Biotech Values

[DewDiligence]

In March, I questioned whether CEPH would
bother with Sparlon (#msg-10325200) if push
came to shove, and it turns out that they won’t.
CEPH can still derive some benefit from
off-label sales of Provigil to kids with ADHD.

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20060809:MTFH46587_2...

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Cephalon to Drop Sparlon After FDA Rejection

Wed Aug 9, 2006 6:52 PM ET

NEW YORK, Aug 9 (Reuters) - Cephalon Inc. <CEPH> said on Wednesday it would halt development of its experimental attention deficit disorder drug, Sparlon, after U.S. regulators told the biotechnology company the medicine would not be approved, and its shares fell 10 percent.

Cephalon said the U.S. Food and Drug Administration rejected the drug, meant to treat children and adolescents with attention-deficit/hyperactivity disorder, even after the company supplied the agency with new safety data that had been requested.

The company said the FDA decision would have no impact on its previously issued sales and earnings forecasts or its expectations for strong 2007 earnings. But Cephalon shares fell to $57.24 in extended trading on Inet electronic brokerage from their Nasdaq close of $63.95.

Cephalon, which had originally expected to be able to launch Sparlon in the first quarter of 2006, suffered a major setback in March, when an advisory panel to the FDA recommended the drug not be approved due to safety concerns. There was concern a patient in a clinical trial had developed a potentially very dangerous skin rash called Stevens Johnson Syndrome.

Last month, however, Cephalon expressed optimism the drug would win approval based on new safety data it provided the FDA.

"Obviously, we are extremely disappointed and surprised that the agency disagreed with the opinions of our experts, which were based on photographic and other evidence concerning a single suspected case of Stevens Johnson syndrome," Chief Executive Frank Baldino said in a statement.

Cephalon said it plans to fully reserve the $8.6 million of net Sparlon inventory on its balance sheet as of June 30, but the move would not change its reported earnings per share for the first half of the year.

Sparlon contains the same active ingredient as Cephalon's flagship sleep disorder medicine, Provigil. But as the new version was intended for use in children it came under renewed scrutiny by FDA advisors.
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