Avanir Pharmaceuticals Inc.'s Zenvia has an uncertain future after the company received an FDA approvable letter asking for additional safety and efficacy data.

Investors bailed on Tuesday, as shares of Avanir (NASDAQ:AVNR) lost nearly half their value, falling $3.42, or 46.2 percent, to close at $3.98. Unknown is the drug's path to market for involuntary emotional expression disorder (IEED), a condition also known as pseudobulbar effect and emotional lability that is characterized by sudden and inappropriate episodes of crying, laughing or other emotional displays in patients suffering from neurological diseases or brain injury.

The agency's response is "clearly a surprise to us," said Eric Brandt, president and CEO of Avanir, which in May acquired Alamo Pharmaceuticals Inc. for $29 million up front to secure a sales force in preparation of Zenvia's launch.

"To say that we're disappointed is an understatement," he told BioWorld Today.

In its approvable letter, the FDA asked for additional safety and efficacy data, and Brandt said he believed it's "likely" that another study would be needed.

"But what that study will [involve], I'm not sure," he said, adding that some of the data "we'll be able to mine from existing studies."

Avanir intends to schedule a meeting with the FDA, the outcome of which could determine whether the company proceeds with Zenvia in IEED.

If the FDA "sets a really high bar," Brandt said, "we'll have to evaluate our options."

The news prompted New York-based Lazard Capital Markets to downgrade Avanir from "buy" to "sell." Analyst Megan Murphy also reduced the company's price target from $18 to $3, and cited in a research note "too much regulatory and financial uncertainty" surrounding Zenvia's approvable letter.

It's not the first regulatory stumbling block for Zenvia, formerly Neurodex, a combination of dextromethorphan and the enzyme inhibitor quinidine designed to help regulate excitatory neurotransmission. Avanir, which has been developing Zenvia since 2000 when it acquired rights to the compound from San Diego-based IriSys Inc., first submitted a new drug application in mid-2005, but the FDA requested additional preclinical data. After that, there were formatting and summarization issues that had to be resolved before Avanir completed a rolling NDA in January.

At that time, the drug was granted a six-month priority review, but the agency pushed the PDUFA data back by 90 days in June.

If the company chooses to continue developing Zenvia in IEED, additional fund raising would be needed. As of June 30, Avanir had cash of about $38 million and, according to Brandt, has a burn rate of about $15 million per quarter.

But "probably the most disappointing part of all this," Brandt said, is that IEED patients still are waiting for a drug.

There's no FDA-approved therapy for IEED. Existing treatments include "compounded drugs that are not safe and are not dose-repeatable," he said.

Neurological disorders, such as multiple sclerosis, Parkinson's disease, Alzheimer's disease and traumatic brain injury, affect about 18 million to 20 million people in the U.S. About 5 percent are believed to suffer from IEED severe enough to require treatment.

In addition to IEED, Avanir also is testing Zenvia in an ongoing Phase III trial in diabetic neuropathy.

Aside from two marketed products - Abreva, which is sold by London-based GlaxoSmithKline plc and FazaClo, a clozapine formulation it acquired via the Alamo purchase - the remainder of Avanir's pipeline is in early clinical or preclinical stages.

It's working with London-based AstraZeneca plc to develop and commercialize reverse cholesterol transport enhancer in cardiovascular diseases, and the companies have started Phase I testing with a lead candidate.

The company is in preclinical development with a migration inhibition factor (MIF) partnered with Basel, Switzerland-based Novartis AG for inflammatory disorders, and has an allergy and autoimmune program of selective cytokine inhibitors aimed at asthma and lupus.

In May, Avanir closed its deal to acquire Alamo, a specialty pharmaceutical firm based in Los Angeles. In addition to the $29 million up front, Avanir agreed to pay up to $40 million in milestones related to sales of FazaClo in patients with schizophrenia. The transaction also provided Avanir with FazaClo's 50-person sales team, which the company anticipated would be used to support commercialization of Zenvia. (See BioWorld Today, May 24, 2006.)

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