Novartis rueful after Fanapt about-face

By Toni Clarke

NEW YORK (Reuters) - Swiss drugmaker Novartis AG (NOVN.VX) said it will think twice in future before discarding an apparently unpromising experimental drug, after the surprise approval of Fanapt, a schizophrenia drug it tossed out after producing mixed results in clinical trials.

Novartis initially licensed Fanapt, known chemically as iloperidone, from Titan Pharmaceuticals. But in 2004, after disappointing clinical trial results, the company licensed it to Vanda Pharmaceuticals, a company formed by Mihael Polymeropoulos, formerly Novartis's vice president of pharmacogenetics.

Contrary to all expectations, the U.S. Food and Drug Administration approved Fanapt in May. Last month, in an awkward about-face, Novartis agreed to pay $200 million to acquire marketing rights to Fanapt in the United States and Canada.

"It's an interesting story, and it's a lesson," said Joe Jimenez, head of Novartis Pharmaceuticals, at the Reuters Health Summit in New York. "We have to look very hard before we give up on a compound."

In clinical trials, Fanapt was shown to be about as effective as Pfizer Inc's (PFE.N) Geodon -- the worst-performing in a class dominated by AstraZeneca Plc's (AZN.L) Seroquel, Eli Lilly & Co (LLY.N) Zyprexa, Johnson & Johnson's (JNJ.N) Risperdal and Bristol Myers Squibb Co's (BMY.N) Abilify.

Geodon generated sales of $1 billion in 2008. Sales of Zyprexa, by comparison, the biggest money-maker, were $4.7 billion.

Jimenez conceded that Fanapt is likely to be a relatively small player.

"We're not saying its going to be a blockbuster," he said, "but we believe there is an opportunity here. "