By Paul Sandle
LONDON (Reuters) - Shire (L:SHP) reported positive results for a new eye drug on Tuesday, increasing the chances of lifitegrast reaching the market next year and boosting the London-listed group's prospects as it tries to buy Baxalta (N:BXLT).
Chief Executive Flemming Ornskov said the news would help Shire's attempt at an equity-based takeover of its U.S. rival to create a global leader in treatments for rare diseases.
Lifitegrast significantly improved patient symptoms in a new study, supporting a resubmission of the potential blockbuster drug to U.S. regulators early next year.
Shares in Shire jumped more than 6 percent, while Baxalta gained 3 percent.
The U.S. Food and Drug Administration (FDA) declined to approve lifitegrast for dry-eye disease this month, saying it wanted more data from an additional clinical study.
Ornskov said the company would resubmit the drug, which it has said could have sales of at least $1 billion a year by 2020, in the first quarter, and if approved it could be launched later in 2016.
"We have a very attractive package to refile with the FDA," he told Reuters.
The randomised study had delivered "pretty amazing data" that showed the product worked within 14 days, he said, and that FDA approval would make available a new class of drug to treat a condition that affected about 29 million Americans.
A submission in Europe would follow, he said, and the company is also looking at the Canadian and Japanese markets.
The appeal of the Baxalta takeover proposal had been tarnished by a 20 percent drop in Shire's share price in the months after it declared interest last August in striking a $30 billion (20 billion pound) deal.
Shire's stock has been hit by uncertainty over the Baxalta bid and a wider rout in drug company shares driven by investor worries about political pressure on U.S. drug prices.
"Today the equity story for Shire has been strengthened and what could have been seen as potential large uncertainty on the part of Baxalta shareholders must have been somewhat diminished today with this data," Ornskov said.
Analysts at Jefferies said the new Lifitegrast study -- the fifth in total for the medicine -- would boost the likelihood of approval, a development that justified a share price rise of about 5 percent.
They said that the FDA had indicated that the only prescription drug on the market for the condition, Restasis, had only marginal efficacy, setting a relatively low bar for approval of alternatives.