Last Updated: 2001-02-26 17:02:02 EST (Reuters Health)

WASHINGTON (Reuters Health) - Lawyers representing Schering-Plough shareholders have filed a class action lawsuit alleging that the pharmaceutical firm failed to disclose unresolved manufacturing issues with the US Food and Drug Administration (FDA) that have delayed the launch of a successor to its blockbuster allergy drug Claritin and triggered a sharp decline in the value of its stock.

The lawsuit, filed on Friday in the US District Court for the District of New Jersey, charges that Schering-Plough failed to report in its public statements that the FDA had suspended operations at facilities in New Jersey and Puerto Rico, where the new-generation allergy drug Clarinex (desloratadine) would be manufactured.

The FDA noticed manufacturing problems in those plants in the fall of 1999, and recently re-inspected them in a follow-up visit, according to Schering-Plough.

Because Schering-Plough kept these facts from the public, investors who bought stock between July 25, 2000 and February 15, 2001 paid "artificially inflated prices," the suit alleges. The complaint also states that Schering-Plough "falsely implied that there were no known impediments to receiving approval for its most important new drug, which was in the final stage of the FDA's review process."

When Schering-Plough reported its regulatory problems in a statement on February 15, the company's shares plummeted from $48.32 to $38.25, the plaintiffs claim. At that time, the company estimated that its earnings could fall by as much as 15% from the first quarter 2000.

As reported by Reuters Health, the problems uncovered by the FDA must be corrected before the firm can receive marketing approval for Clarinex. The company had originally hoped to launch the drug in time for the upcoming allergy season, which begins in March.

A Schering-Plough spokesman told Reuters Health that the company "believes it has substantial defenses" in the case, and will "vigorously" assert them.

He said that Schering-Plough received an approvable letter from the FDA in mid-February advising the company that it would not approve Clarinex until the manufacturing violations were addressed at two facilities in New Jersey and a third in Puerto Rico. He stressed, however, that the manufacturing deficiencies were uncovered as part of an ongoing good manufacturing practices (GMP) inspection and do not necessarily affect the production of desloratadine.

The spokesperson would not comment specifically on whether the FDA's approvable letter was the first time Schering-Plough was told that the desloratadine approval hinged on the company's GMP corrections, saying only that Schering-Plough is "committed to making timely disclosure of information and believes it has done so" in this instance.

If approved, Clarinex will compete with Aventis' Allegra and Pfizer's Zyrtec. Schering-Plough's setback "effectively puts a hold on desloratadine approval, which benefits Aventis," Nigel Barnes, pharmaceuticals analyst at Merrill Lynch, said when Schering-Plough initially disclosed the difficulties. "Desloratadine was going to add to competitive pressures in the marketplace but that is now being rolled back, probably somewhere between 6 and 12 months." Analysts said the same problems also appeared to be behind a delay in approval for Schering-Plough's new asthma drug Asmanex, which will compete with GlaxoSmithKline's low side-effect steroids Flovent and Advair.

"Our highest priority is--and always has been--the well-being of patients who use our products," Richard Jay Kogan, chairman and CEO of Schering-Plough, said in the February 15 statement. "I am taking full responsibility for resolving these matters in a timely manner and securing FDA's confidence in the quality and reliability of our manufacturing systems and controls."

Analysts now expect Schering-Plough shares to earn 48 cents per share for the first quarter 2001, and $1.90 for the full year 2001. Clarinex, a non-sedating antihistamine, is an active metabolite of Claritin (loratadine), which is due to go off patent in December 2002. Claritin sales totaled approximately $3 billion last year.