FDA rejects Wyeth anti-psychotic drug

NEW YORK (CNNMoney.com) -- The FDA shot down an experimental schizophrenia drug from the drugmakers Wyeth and Solvay Pharmaceuticals.

The drugmakers said Friday that they received a "not approvable" letter from the Food and Drug Administration for their experimental anti-psychotic, bifeprunox. The companies said there wasn't enough test data demonstrating the drug's effectiveness to merit approval.

Wyeth's (down $0.52 to $46.07, Charts, Fortune 500) stock dropped more than 5 percent on the news. The Madison, N.J.-based drugmaker could have used some good news from the FDA, considering the stock hemorrhaged more than 10 percent in July, after the agency delayed approval of its experimental antidepressant Pristiq.

But Joseph Mahady, president of global business, said bifeprunox still had potential as a schizophrenia drug.

In a teleconference with investors, Mahady said he will continue studies on the anti-psychotic, though its potential market entry was now delayed by two years. Mahady said his company would be releasing more data on bifeprunox efficacy in the first or second quarter of 2008.

Wyeth's chief medical officer Dr. Gary Stiles said the FDA wanted to know more about a patient who died during clinical trials. Stiles said Wyeth is studying the cause of death, and the FDA believes there could be a relation to the drug, though that is inconclusive.

In interviews prior to the FDA's decision on bifeprunox, analysts said that in studies involving 2,650 patients the most serious side-effect was nausea.

The anti-psychotic market is currently dominated by Johnson & Johnson's (up $0.17 to $61.32, Charts, Fortune 500) Risperdal and Invega, which together totaled $2.3 billion in sales during the first half of 2007.

But the patent for Risperdal is expected to run out in 2008. At that time, the schizophrenia market is expected to come under pressure from low-cost generic versions of Risperdal. Also, the patent for Eli Lilly & Co.'s (up $0.10 to $56.83, Charts, Fortune 500) Zyprexa is expected to run out in 2011, putting further pressure on the industry.

Generic competition would drive down revenues for competing name-brand anti-psychotics, such as Abilify from Bristol-Myers Squibb (up $0.20 to $29.02, Charts, Fortune 500), which totaled $800 million in sales during the first six months of 2007, Seroquel from AstraZeneca (down $0.38 to $47.58, Charts), with nearly $2 billion during the first half, and Pfizer's (down $0.08 to $23.91, Charts, Fortune 500) Geodon, with $400 million in the first half.

This hasn't stopped other drugmakers from developing new anti-psychotics. Organon is testing asenapine for schizophrenia and Vanda Pharmaceuticals plans to file its experimental iloperidone with the FDA.

Barbara Ryan, analyst for Deutsche Bank North America, was unimpressed by Wyeth's "salvage strategy for a product that can't compete on the merits of its efficacy profile."

Ryan dropped her 2010 sales estimate of $250 million for bifeprunox, and lowered her Wyeth price target and earnings estimates accordingly.

"If [bifeprunox] does ever reach the U.S. market, we believe it will have a very limited role in a crowded category that will include several widely used generic products," wrote Ryan, in a published note.

Schizophrenia affects 1.1 percent of the adult population in the U.S., according to the National Institute of Mental Health. According to the government agency, schizophrenics "sometimes hear voices others don't hear, believe that others are broadcasting their thoughts to the world, or become convinced that others are plotting to harm them."

Ryan does not own Wyeth stock, but Deutsche Bank does seek business with the company.

Correction: An earlier version of this story stated Schering, rather than Organon is testing asenapine for schizophrenia.