UPDATED: FDA denies Otsuka and Lundbeck's antipsychotic drug

U.S. regulators have delayed the potential launch of a once-monthly version of the blockbuster antipsychotic Abilify. Otsuka Pharmaceutical and partner H. Lundbeck broke the bad news late last week that the FDA handed the companies a complete response letter (CRL), saying deficiencies were uncovered in an inspection of a third-party supplier of sterile water for making the drug.

"Otsuka is working closely with the third-party supplier to resolve the issue as quickly as possible and is planning further discussions with the agency to determine next steps," the Japan-based drugmaker, which markets the $4.5 billion drug Abilify with Bristol-Myers Squibb ($BMS), said in its statement.

The setback obviously delays potential U.S. approval of the drug and shortens Otsuka and Lundbeck's lead over rival Alkermes ($ALKS) in developing once-monthly aripiprazole. At the same time, Otsuka and Lundbeck lose time in bringing a potential new drug to market as both companies grapple with aging product portfolios. But analysts don't view the CRL setback as a crippling blow.

"Despite our limited knowledge into Otsuka's suppliers, we assume this issue gets resolved in relative short order, allowing for approval sometime in 2013," J.P. Morgan analyst Cory Kasimov wrote in a note to investors. Cowen & Company analysts figured that the CRL shortens Otsuka/Lundbeck's two-year lead on Alkmeres by 6 to 8 months.

Alkermes is enrolling patients in a Phase III trial for its contender, ALK 9070, with results of the late-stage study expected in mid-2013 and potential FDA approval in the following year. The drug is the Ireland-based biotech's most advanced pipeline candidate, and Cowen estimated peak sales of 9070 could top $500 million.

"In the longer term, we believe that Otsuka and Lundbeck's presence would benefit Alkermes by expanding the long-acting market in the U.S. (currently, long-acting formulations account for only about 5% of the domestic atypical antipsychotics market) and creating interest in the aripiprazole depot formulations," Cowen analysts wrote.

- here's the Otsuka release

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