Aug. 1 (Bloomberg) -- Schering-Plough Corp. fell on the New York Stock Exchange after U.S. regulators rejected the drugmaker's sugammadex to help patients recover from anesthesia.

The shares dropped 67 cents, or 3.2 percent, to $20.41 in composite trading at 4:15 p.m. The dip was Schering-Plough's biggest since a 17 percent decline on July 21, when researchers cited the occurrence of cancer in patients taking Schering-Plough and Merck & Co.'s cholesterol drug Vytorin.

The U.S. Food and Drug Administration sent Schering-Plough a ``not-approvable'' letter for sugammadex because of ``hypersensitivity/allergic reactions,'' the Kenilworth, New Jersey, company said today in a statement. Schering-Plough said it would work with the agency to ``address the issues.''

The injected drug, also called Bridion, is designed as a safer, faster alternative to older drugs used to reverse anesthesia, providing doctors greater control over sedated patients in millions of surgeries performed each year. An FDA advisory panel unanimously recommended approval of the drug in March, and European regulators approved it earlier this week. In human tests of the drug, one patient suffered a severe allergic reaction.

``We are surprised and disappointed by this action,'' said Thomas P. Koestler, president of Schering-Plough's research institute, in the statement. ``Sugammadex represents the first major pharmaceutical innovation in the field of anesthesia in two decades.''

Schering-Plough acquired Bridion when it bought Akzo Nobel NV's Organon BioSciences unit for $16.1 billion in November. The drug may have peak annual sales of $200 million to $700 million, if approved, analysts said. New products would help Schering- Plough reduce dependence on Vytorin and Zetia, also a cholesterol drug, which have seen a decline in prescriptions.

Hypersensitivity

The FDA staff found in a report issued in March that some people receiving Bridion in studies reported hypersensitivity reactions.

``The occurrence of this reaction, even in a relatively small number of subjects, could have a significant impact on the overall finding of safety it is found to be related to Bridion,'' the agency's staff said.

The stock had gained 5.1 percent yesterday, after analyst David R. Risinger at Merrill Lynch changed his recommendation for Schering-Plough to buy from neutral. Risinger's note included the possibility of sugammadex being approved.

Risinger also said prescriptions for Vytorin have held up since July 21. Researchers who conducted the study, called SEAS, said the higher number of cancer cases may have been a fluke and other ongoing studies showed no such risk.

To contact the reporter on this story: Kurt Heine in New York at kheine1@bloomberg.net.

Last Updated: August 1, 2008 16:54 EDT