June 4, 2008 / 7:23 PM / 9 years ago

UPDATE 2-Indevus testosterone drug hits safety snag, shrs crash

4 IN. DI LETTURA

(Adds detail, comment; updates share movement)

By Aradhana Aravindan

BANGALORE, June 4 (Reuters) - Indevus Pharmaceuticals Inc's IDEV.O injectable testosterone drug's approval may be delayed by two years, as U.S. health regulators are expected to ask for more safety data, wiping out more than two-thirds of the company's market value.

The decision on approval of the drug Nebido was set to be taken later this month, but will now be delayed as Indevus plans to conduct another safety study and re-apply for approval in around 18 months, which would be followed by six months of review.

This means the company may have to use its available cash of about $60.8 million at March 31 for the added study. The cash could have been used for the previously anticipated launch of Nebido.

Indevus Chief Executive Glenn Cooper said the company will allocate resources to conduct the additional safety study.

However, UBS analyst Annabel Samimy said with lesser than $65 million in cash and a burn rate in the high teens, "operations may be stretched to conduct final studies for Nebido and continue to develop Octreotide."

Indevus, which focuses on treating urology and hormone-related conditions, planned to start a late-stage trial for its octreotide implant for acromegaly, a disorder that results from excessive growth hormone, in the first half of this year.

The company has a number of drugs on the market, including Sanctura for overactive bladder, and several others in the pipeline, but Nebido was considered to be the product with the most market opportunity and the one investors were focused on.

"It (Nebido) was the most exciting in the whole portfolio. It was frankly the reason we recommended the stock," Leerink Swann analyst Gary Nachman said by phone.

The analyst said he would retain his "outperform" rating on the stock as he believes the company to have a lot more value than what it was currently getting credit for.

UBS's Samimy said the company has several out-licensing opportunities and could monetize its Sanctura XR royalty for additional funds. Currently, Allergan Inc (AGN.N) pays royalty to Indevus for the drug.

Leerink's Nachman believes there is a possibility of Allergan buying off Sanctura XR royalty stream from Indevus.

Indevus shares were down 70 percent at $1.23 in late trade on Nasdaq. They touched $1.21 -- their lowest in more than five years -- earlier in the session.

Injection Reaction

Wednesday's news stems from the U.S. Food and Drug Administration's concerns related to a reaction immediately following an injection of Nebido, which could lead to coughing, shortness of breath and in some cases dizziness, flushing or fainting.

The company, which has not yet received a formal request for additional safety data on Nebido from the FDA, had previously applied for approval in August last year.

Nebido treats male hypogonadism, a disorder in which testicles do not produce enough of the male sex hormone testosterone.

The company said it believes the concerns arise from the post-marketing adverse event reports of the 1000 mg, or 4ml, dose of the drug, sold in Europe by German company Bayer Schering Pharma AG SCHG.DE.

Indevus, based in Lexington, Massachusetts, owns the U.S. rights to Nebido.

"We are very surprised and disappointed by the position the FDA is taking regarding the safety profile of Nebido given the large European experience. Rare coughing reactions have been well-described in the European product labeling of Nebido," Indevus CEO Cooper said in a statement. (Additional reporting by Varsha Tickoo; Editing by Himani Sarkar)

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