Lily Shares Fall After FDA Rejects Long-Acting Zyprexa

U.S. regulators have rejected a long-acting injectable form of Eli Lilly's blockbuster schizophrenia drug Zyprexa, the company said Thursday, sending its shares down almost 2 percent.

Eli Lilly's drug Zyprexa.
Darron Cummings
Eli Lilly's drug Zyprexa.

In its "not approvable" letter to Lilly , the Food and Drug Administration said it needed more information to better understand the risk and underlying cause of excessive sedation seen in about 1 percent of patients in clinical trials, the company said.

Many schizophrenics are prone to stop taking their treatments when symptoms, including hallucinations and social withdrawal, abate. Long-acting Zyprexa, which would have to be taken only about once a month, is meant to help ensure that patients remain medicated and keep their symptoms under control.

An FDA advisory panel earlier this month voted unanimously that the experimental formulation appeared effective and was acceptably safe in treating stable patients as well as those with acute flare-ups of symptoms -- despite a risk of severe sedation.

About 1 percent of patients treated in Lilly's studies experienced excessive sedation within three hours of an injection, including two cases described as comas. All patients recovered fully within three days.

Deutsche Bank analyst Barbara Ryan said on Thursday the sedation problem was a serious concern, particularly for such a vulnerable population of patients, and that she was therefore not greatly surprised that the FDA had failed to follow the recommendation of its advisory panel.

"It's disappointing but not a total surprise," said Ryan.

Even if the long-acting Zyprexa had been approved, she said, the sedation danger would have limited peak annual sales to only $200 million to $300 million.

The basic formulation of Zyprexa, by far Lilly's biggest product with global 2007 sales of $4.8 billion, will lose its U.S. patent protection in 2011 and face competition from cheaper generics.

Ryan said the new formulation would have been able to offset only a smidgen of the expected sales decline for Zyprexa.

She called Thursday's sell-off in Lilly shares excessive, given the limited commercial prospects of long-acting Zyprexa. Lilly shares were down 92 cents to $50.91 in early trade on the New York Stock Exchange.