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Cephalon shares fall after FDA rejects hyperactivity drug

Company says it thought concerns had been resolved

SHARE Cephalon shares fall after FDA rejects hyperactivity drug

PHILADELPHIA — Shares of Cephalon Inc. plunged almost 13 percent Thursday after the company said it is abandoning a hyperactivity drug that was rejected by the Food and Drug Administration.

The company said late Wednesday that the FDA failed to approve Sparlon because one patient taking the drug was suspected of developing Stevens Johnson syndrome, a potentially life-threatening skin disease. Cephalon said it submitted opinions from several experts that the patient didn't develop the disease. Sparlon would have been used to treat attention deficit hyperactivity disorder in children and adolescents.

"We're rather surprised that the agency chose to go this path in light of the information we sent," said chief executive Frank Baldino Jr. in a conference call with analysts. "The only issue ever raised about this drug was this particular case, and we really thought we put it to bed."

He said the FDA suggested Cephalon could conduct additional studies that would involve thousands of patients. But even then, FDA approval is still not guaranteed, even with good results.

"The requirements for additional safety data proposed by the FDA were pretty onerous," said E. Russell McAllister, an analyst at Merriman Curhan Ford in San Francisco who downgraded the stock to "sell." "It would require significant expense, significantly delay a product launch."

The approval of Sparlon would have broadened the hyperactivity market for Cephalon, which has operations in Salt Lake City. Its main drug, Provigil, has been approved by the FDA to treat sleep disorders in adults, but doctors also prescribe it for hyperactivity. About 5 percent to 10 percent of Provigil use is for hyperactivity.

Sparlon would have been Cephalon's first drug to specifically treat the disorder.

Investors sold off the stock because they expected Sparlon to be approved, McAllister said. Sparlon is a higher dose of modafinil, the active ingredient in Provigil.

The FDA's decision to reject Sparlon sparked a concern that the agency might re-examine Provigil and upcoming sleep disorder drug Nuvigil, which contains a version of modafinil.

Cephalon shares plummeted $8.05, or 12.6 percent, to close at $55.90 on Nasdaq.