Shares in UK biotechnology firm Vernalis have taken a huge hit this morning after the company and partner Endo Pharmaceuticals announced that US regulators have issued a non-approvable letter for Frova as a treatment for menstrual migraine.

The firms said that the US Food and Drug Administration has “identified deficiencies and asked for additional information” pertaining to the supplemental New Drug Application for Frova (frovatriptan) in the letter. While the agency acknowledged that both pivotal efficacy trials that had been submitted as part of the sNDA met their primary endpoints in significantly improving the number of headache-free perimenstrual periods, it questioned whether the benefit demonstrated was clinically meaningful. The FDA also noted that even though serious vascular adverse events were not observed, an increased risk could not be ruled out.

The decision is a bad one for both firms and Vernalis said last month that getting the go-ahead for the new Frova indication was vital to financing its future projects. Following the agency’s letter, chief executive Simon Sturge said that “we are surprised and disappointed by the FDA’s response, as they had not engaged the companies in any dialogue during the extended review cycle as to FDA’s interpretation of the data in the application”.

He added that it is important to note that this action does not affect the current approved acute migraine use of frovatriptan and that, in addition to Frova, Vernalis has another product on the market, Apokyn (apomorphine hydrochloride injection) for Parkinson's disease, and a further seven product candidates in clinical development. “We have already been evaluating a number of options for our overall operations which we shall now review in the light of the FDA decision,” he said, adding that the firm will provide more details of the actions to be taken “in due course.”

If the sNDA had been approved, Vernalis would have been in line to receive a $40 million milestone but had previously warned that “existing cash balances are unlikely to be sufficient to fund its future planned net losses” if the payment was not forthcoming. This latest upset could now mean the delay or cancellation of clinical programmes, job losses and further equity financing.

Endo is not best pleased either and chief executive Peter Lankau said that “we believe that the data submitted to the FDA was sufficiently compelling to warrant approval of Frova for the short-term prevention of menstrual migraine based on multiple studies that demonstrated the safety and effectiveness of the new treatment regimen”. He noted that the firm is reviewing the impact of the FDA’s decision on its financial results for 2007.

Vernalis investors have reacted badly to the news and the stock price fell 52% in early-morning trade but ended the day down 20.5% to £0.20 per share. By Kevin Grogan