UPDATE 2-FDA rejects Labopharm depression drug application

Mon Jul 20, 2009 11:18am EDT

* FDA cites deficiencies at a manufacturing facility

* Shares down 18.5 percent at C$1.94 (Adds company and analyst comments, updates share price; in U.S. dollars unless noted)

By Scott Anderson

TORONTO, July 20 (Reuters) - Labopharm Inc DDS.TO said on Monday the U.S. Food and Drug Administration has denied approval of its once-daily depression treatment Trazodone, citing deficiencies at a manufacturing facility, sending its shares down as much as 28 percent.

The FDA told the small Montreal-based company in a letter that the treatment would not be approved until all its concerns about deficiencies were satisfied.

Labopharm did not specify what the deficiencies were, but said the issues were raised following an inspection at an Italian facility that makes an ingredient used in Trazodone. It said no efficacy or safety issues about the drug were raised.

The active ingredient is made by Italy's Gruppo Angelini. The companies reached an agreement in 2004 that granted Labopharm global commercialization of the formula. The final product will be made at a Labopharm plant in North America.

The company could not determine what affect the FDA ruling would have on its plans. Earlier this year, Labopharm said it hoped to launch Trazodone in the United States by the end of 2009 or early 2010.

"We are actually pretty optimistic. This isn't obviously the outcome we were hoping for ... but we continue to plan for commercialization of the product," said Labopharm spokesman Jason Hogan.

Labopharm shares, which had climbed about 250 percent this year in anticipation of the drugs approval, were off 18.5 percent at C$1.94 on the Toronto Stock Exchange on Monday morning. Earlier in the season they were down 28.2 percent at C$1.71.

"It's definitely a setback compared with expectations, but on the range of possible outcomes it is a relatively small deal," said Neil Maruoka, an analyst at Canaccord Adams.

Antidepressants had sales of $12 billion in the United States in 2007.

($1=$1.11 Canadian) (Reporting by Scott Anderson; editing by Rob Wilson)

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