Nuvigil Granted Priority Review

Cephalon, Inc. (CEPH - Analyst Report) recently received priority review from the U.S. Food and Drug Administration (FDA) for its supplemental New Drug Application (sNDA) for Nuvigil. The company had filed the sNDA in June 2009, seeking to expand Nuvigil’s label as a treatment for improving wakefulness in patients with excessive sleepiness associated with jet lag disorder due to eastbound travel.

Priority review status means that a response from the agency will be out in six months instead of the usual 10-12 month review period. As such, a response from the FDA should be out by December 29, 2009.

Nuvigil is Cephalon’s follow-on sleep franchise product which received FDA approval in June 2007 for the treatment of excessive sleepiness associated with obstructive sleep apnea/hypopnea syndrome (OSAHS), narcolepsy and shift work sleep disorder (SWSD).

Cephalon launched Nuvigil in June 2009 and is promoting the product aggressively. The company has taken several initiatives to ensure the smooth transition of users to Nuvigil, which has been priced at a significant discount to Provigil. Cephalon is looking to maximize market penetration ahead of the entry of generic versions of Provigil in 2012. Several generic players including Mylan Labs (MYL - Analyst Report) and Teva (TEVA - Snapshot Report) are seeking to launch generic versions of Provigil.

We believe Cephalon has ample time to switch users to Nuvigil and maintain growth of the sleep franchise. Besides this, approval for additional indications should help expand the market for the product and drive sales in the company’s sleep franchise.

In addition to the jet lag disorder indication, the company is evaluating Nuvigil’s effectiveness in the treatment of traumatic brain injury, restless leg syndrome, major depressive disorder, schizophrenia and fatigue associated with cancer. Cephalon intends to file three sNDAs for Nuvigil in the next five years.

We currently have a Neutral rating on Cephalon. We expect investor focus to remain on Cephalon’s emerging oncology pipeline, Amrix, and the conversion of patients to Nuvigil.