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Shares of Cypress rose 26 percent in early trading while shares of Forest rose 5 percent.
The drug, Savella, will compete with Cymbalta, an antidepressant made by Eli Lilly & Co that is also approved for fibromyalgia, and Lyrica, an anticonvulsant made by Pfizer Inc.
Savella and Cymbalta block the reabsorption in the brain of the chemicals serotonin, which regulates mood, and norepinephrine, which regulates pain. Savella is more selective than Cymbalta in targeting norepinephrine.
David Windley, an analyst at Jefferies & Co, said that if Savella is priced in line with Lyrica and Cymbalta, the drug could conservatively generate about $500 million in sales by 2013.
"Due to Savella's unique mechanism of action, our consultants believe it to be the best drug to treat the symptoms of fibromyalgia," Windley said in a research note.
Rights to Savella outside the United States are held by the French company Pierre Fabre Medicament, which developed the drug -- known chemically as milnacipran. Pierre Fabre licensed the U.S. rights to Savella to Cypress.
Brian Abrahams, an analyst at Oppenheimer and Co, said the approval is a "transformative event" for Cypress, and has a price target on Cypress' shares of $16 over the next 12 to 18 months.
"Assuming a sales trajectory in line with our estimates, we believe there is a reasonable probability Forest could acquire Cypress in the future," he said in a research report.
For Forest, the approval is expected to go some way to offset the projected decline in sales from its antidepressant Lexapro, when Lexapro loses patent protection in early 2012.
Late last year, Forest said it had agreed to pay at least $75 million to Pierre Fabre for North American rights to a chemical cousin of milnacipran, known as F2695, to treat depression.
Shares of Cypress rose $1.81 or 25 percent, to $9.02 on Thursday morning on the Nasdaq. Shares of Forest rose $1.14 or 5 percent to $25.37 on the New York Stock Exchange.
(Reporting by Toni Clarke, editing by Matthew Lewis) Keywords: CYPRESS/SHARES
(toni.clarke@thomsonreuters.com; + 617-856-4340; reuters messaging: toni.clarke.reuters.com@reuters.net)
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