Sanofi (NYSE:SNY) said today that the Food and Drug Administration rejected the marketing application to approve its multiple sclerosis drug Lemtrada.

The rejection -- called a complete response letter -- isn't a big surprise after the agency expressed concerns about the design of the clinical trials used to support the approval. An FDA advisory committee of outside experts voted 11-6 that the trials were not adequate or well-controlled.

Patients received either Lemtrada or Pfizer (NYSE:PFE) and EMD Serono's Rebif, but the trials weren't double blinded, so doctors and patients knew which drug the patient received. Open-label designs can lead to biases, which Sanofi tried to control for by blinding the doctors that assessed the results.

The FDA believes the design of the trial made the positive results suspect and told Sanofi to run one or more additional clinical trials with a different design before Lemtrada can be approved.

The drug was a major source of tension over the value of Genzyme when Sanofi purchased the biotech in 2011. To close the deal, Sanofi gave Genzyme shareholders contingent value rights, or CRV, entitling them to additional payments tied to the approval and sales goals for Lemtrada.

Sanofi said it plans to appeal the FDA's decision, but an approval before the March 31, 2014, milestone to receive part of the $14 CRV payment is unlikely. The sales milestone portion of the CRV will be hard to meet if Sanofi is unable to gain approval in the U.S.

Lemtrada is already approved in the European Union, Canada, and Australia.


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