CORRECTED - U.S. FDA approves Avanir involuntary emotion drug

Fri Oct 29, 2010 7:42pm EDT

(Corrects name of drug throughout to Nuedexta instead of Zenvia. The drug was previously called Zenvia)

* FDA OKs first product to treat pseudobulbar affect

* Analysts see peak annual sales up to $500 million

* Shares rise 15 percent

NEW YORK, Oct 29 (Reuters) - U.S. health regulators on Friday approved Avanir Pharmaceuticals Inc's (AVNR.O) Nuedexta, a treatment for a neurological disorder in which patients cannot control outbursts of crying or laughter.

U.S. Food and Drug Administration spokeswoman Sandy Walsh said the agency had approved the long-delayed drug.

Nuedexta is the first drug approved for the treatment of the little known, but not that rare, condition called pseudobulbar affect (PBA), which is also known as involuntary emotional expression disorder.

Analysts expect Nuedexta to garner peak U.S. sales of $350 million to $500 million, and Avanir shares rose 15 percent in light after-hours trading on Friday.

The approval could make Avanir an attractive acquisition target for larger companies desperate for new products that don't carry the risk of FDA rejection faced by promising experimental medicines.

PBA affects an estimated two million Americans suffering from multiple sclerosis, Lou Gehrig's disease (ALS), stroke and other neurological disorders or trauma that can cause brain lesions.

Avanir suffered a major blow four years ago, when the FDA rejected Nuedexta and asked for new trials due to safety concerns. The FDA was uneasy about the heart rhythm impact of quinidine, a component of the drug used to increase the amount of the active ingredient, dextromethorphan, in the body.

The agency asked Avanir to go back and perform new trials with only a third as much quinidine -- 10 milligrams instead of 30 mg. In August of 2009, Avanir said its reformulated Nuedexta met the main goal of the new pivotal study by significantly reducing the emotional outbursts tied to PBA .

The FDA accepted the resubmission of Avanir's marketing application in May, paving the way for Friday's approval.

Many investors may have been betting on another delay as Avanir shares fell nearly 14 percent to $2.42 on Nasdaq before the FDA announced the approval.

Avanir shares rose to $2.79 in light extended trading. (Reporting by Krishnakali Sengupta and Shravya Jain in Bangalore; additional reporting by Bill Berkrot in New York and Susan Heavey in Washington; editing by Carol Bishopric)