Watson's Drug Fails to Get Support

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Watson Pharmaceuticals Inc. (NYSE:WPI - News) and Columbia Laboratories Inc. (NasdaqGM:CBRX - News) recently announced that the US Food and Drug Administration’s (:FDA) advisory committee recommended against the approval of progesterone vaginal gel 8%. The companies had filed for the US approval of the gel in June 2011 for the reduction of risk of preterm birth in women with short uterine cervical length at the mid-trimester of pregnancy.

The committee agreed that progesterone gel was safe but said that it needed more information in order to recommend the candidate for approval. The FDA’s decision on progesterone gel is expected by February 26, 2012.

We view this development as a concern, as the gel was one of the lead pipeline candidates at Watson Pharma. Following this news, the shares of the company fell 3.5%. In case the US regulatory body chooses to go with the committee’s recommendation, it would be a major setback for Watson Pharma.

We note that in addition to the US rights to progesterone vaginal gel, Watson Pharma also acquired the US rights to Crinone from Columbia Labs last year. Crinone is indicated for the treatment of infertility in women. According to the agreement, Columbia Labs receives royalties on net sales made by Watson Pharma. Outside the US, Crinone is marketed by Merck KGaA (Other OTC:MKGAY.PK - News).

Watson Pharma had launched Crinone in 2010, along with ella and Trelstar. Ella is an emergency contraceptive which helps in preventing pregnancies for up to five days after unprotected intercourse, whereas Trelstar is marketed for the palliative treatment of advanced prostate cancer.

Moreover, Watson Pharma also gained approval for an oral contraceptive in December 2010. The product, which is licensed from Warner Chilcott plc (NasdaqGS:WCRX - News), is a chewable 25-microgram ethinyl estradiol product with a 24/4 dosing regimen.

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