Cephalon has decided to drop its Sparlon drug for attention-deficit hyperactivity disorder (ADHD) after the US Food and Drug Administration rejected its application to market the drug.

Shares in the company were down 2% on the news, which was announced just ahead of the Nasdaq close yesterday, but continued to decline in after-hours trading.

The FDA ruled that Sparlon (modafinil) tablets were not-approvable, five months after one of its advisory committees declined to back the product because of a possible link to a serious and potentially fatal skin reaction known as Stevens Johnson syndrome. Cephalon supplied new data to try to back up Sparlon’s safety profile, but was unable to sway the agency.

"Obviously, we are extremely disappointed and surprised that the agency disagreed with the opinions of our experts, which were based on photographic and other evidence concerning a single suspected case of Stevens Johnson syndrome," said Frank Baldino, Cephalon’s chief executive, in a statement.

The company insists that Sparlon’s demise will have no impact on its sales and earnings guidance for 2007, although the loss of Sparlon comes after disappointing results in a trial aimed at extending the indications of the firm’s epilepsy drug Gabitril (tiagabine) to include generalised anxiety disorder, as well as a delay in May to the firm's application to market sleep disorder drug Nuvigil (modafinil) while labelling is agreed with the agency.

After the FDA advisory committee rejected its application in March, Cephalon said its 2006 sales would be reduced by $100 million to $1.45-$1.5 billion as a result of the delay to the Sparlon project.