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April 8, 2010, 1:21 p.m. EDT

Forest Labs falls, sPivida rallies

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By Val Brickates Kennedy, MarketWatch

BOSTON (MarketWatch) -- Forest Laboratories was the leading decliner among the larger-cap drug stocks Thursday, as shares of the drug-maker lost ground on news that an advisory panel of the U.S. Food and Drug Administration has recommended the agency not approve Forest's new pulmonary drug Daxas.

Shares of Forest fell 12% to $28.56.

The FDA panel voted late Wednesday that Forest had not provided enough evidence to show that Daxas was effective in treating certain patients with chronic obstructive pulmonary disease, or COPD. The vote was in contrast to two previous votes that indicated the panel in general thought the drug safe and effective.

While the FDA is not bound to the recommendations of its panels, it often follows them.

Analysts at Lazard Capital Markets cut their rating of the stock to hold from buy on Thursday.

Shares of drug-delivery specialist pSivida Corp. rallied 14% to rest at $5.07.

The company said that a study has shown its drug-delivery technology Durasert was effective help to treat the serious eye disease retinitis pigmentosa.

PharmAthene Inc. shares slid 5% to $1.63.

The bio-defense company said that an institutional investor has agreed to buy 1.7 million new common shares at $1.50 a share, and warrants to purchase an aggregate of 500,000 shares at an exercise price of $1.89 a share. The transaction is expected to close on or about April 13.

The NYSE Arca Pharmaceutical Index eased 0.3% to 306.08 and the NYSE Arca Biotechnology Index was virtually flat at 1234.35.

Val Brickates Kennedy is a reporter for MarketWatch in Boston.

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