FDA caution seen with Schering drug denial

By Lisa Richwine - Analysis

WASHINGTON (Reuters) - The unusual rejection of an experimental drug that had unanimous support from outside experts signals further caution by the U.S. Food and Drug Administration and increased uncertainty for investors.

The FDA's surprising refusal on Friday to approve Schering-Plough Corp's SGP.N Bridion, for reversing the effects of anesthesia, is the latest negative decision that has jolted Wall Street.

Schering-Plough -- shares of which fell as much as 8.6 percent after the company announced the FDA's rejection -- said the agency cited safety concerns in its decision. Meanwhile, European officials approved the drug earlier this week.

Bridion's rejection is "just the latest example of the agency's inexplicable behavior," said analyst Ira Loss of Washington Analysis.

"A legitimate question can be posed to FDA management: Is the fear of future congressional or press oversight so great that there is no one with the courage to approve a product that was unanimously endorsed by an advisory committee and approved in Europe earlier this week?" Loss said.

The FDA has been stung by criticism for its handling of serious side effects from Merck & Co's (MRK.N) arthritis pill Vioxx, pulled from the market in 2004, plus controversies surrounding antidepressants and other widely used drugs.

Consumer groups and lawmakers have pushed the FDA to look more closely at potential side effects to better protect the public from medicines that are too risky.

Drug company executives complain, however, that attacks from critics have made the FDA too nervous to approve drugs with acceptable side effects.

For example, Merck's cholesterol drug Cordaptive has been approved in Europe under another name but was rejected by the FDA. GlaxoSmithKline's cervical cancer vaccine is cleared in Europe but the FDA has delayed a final ruling.

Eli Lilly & Co's (LLY.N) long-acting form of schizophrenia drug Zyprexa also received a near-unanimous FDA panel recommendation in February. All panelists said the drug was safe and effective, except for one who abstained on the safety vote. The FDA rejected the drug two weeks later.

The FDA "has become increasingly unpredictable," Sanford Bernstein analyst Tim Anderson said in a research note.

Over the past two years, roughly 50 percent of FDA review decisions for big drugmakers have had worse-than-expected outcomes, JP Morgan analyst Chris Schott said, adding that he does not expect the trend to improve in the near term.

The Bridion decision is "yet another incidence of the high level of FDA conservatism," Schott said in a research note.

Bridion, known generically as sugammadex, seemed likely to win approval after an FDA panel of outside advisers unanimously ruled the drug was safe and effective in March.

The FDA typically approves medicines with panel endorsements, particularly unanimous ones. The agency also had given Bridion a priority review, a designation reserved for drugs meant to address an unmet medical need.