Shire's eye drug setback gives Allergan's Restasis a temporary reprieve

Shire CEO Flemming Ornskov

The FDA may have handed Shire ($SHPG) a rejection for dry eye drug lifitegrast late last week, but that doesn't mean the drugmaker is down for the count--or so it hopes.

The company will soon have data from a recently completed Phase III study in tow, and if those look positive, it plans to resubmit for FDA approval in the first quarter of 2016, CEO Flemming Ornskov said on Monday in a statement. That could put the wannabe blockbuster "on track for the planned lifitegrast launch next year," he added.

Ornskov's assurances come in the wake of a Friday burn from U.S. regulators, who requested an additional study and more product quality info before they'd approve the drug. But analysts aren't so confident. The FDA's move puts a prospective approval about 9 months behind the current schedule, to next year's third quarter, Leerink Partners analyst Jason Gerberry estimated on Sunday in a note to clients. And now that the FDA has "tied the approval" of the med to the forthcoming study results, a green light "should be viewed as having some risk," Bernstein analyst Ronny Gal wrote to investors on Monday.

Meanwhile, Shire's loss is Allergan's ($AGN) gain. Lifitegrast, if and when it hits the market, will be a "key competitor" to Allergan's Restasis, a $1.2 billion product that's expected to eventually hit $1.6 billion, Evercore ISI analyst Umer Raffat wrote on Saturday in a note. Restasis is also currently the only prescription option out there for patients with dry eye.

As Raffat notes, though, Restasis doesn't actually have a specific FDA nod for dry eye; instead, it has a go-ahead for "tear production increase." That means lifitegrast could snatch that patient pool if it gets a full dry-eye indication, he wrote.

- read Shire's release

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