The U.S. Food and Drug Administration approved Neurocrine Biosciences Inc's drug to treat tardive dyskinesia, a side effect of antipsychotic medications characterized by uncontrolled movements of the face and body, the company said.
Shares of the San Diego-based company were up about 18.5 percent to $49.15 after the closing bell on Tuesday.
The drug, Ingrezza, is the first treatment to be approved for the irreversible disorder, which occurs in 5 percent to 8 percent of patients taking antipsychotic drugs. Ingrezza is the company's first commercial product.
Neurocrine said the drug, which is expected to launch in May, will be priced competitively. Last year, it said Ingrezza would be listed at a net price of between $20,000 to $60,000 per year, depending on the required dosage.
Wall Street analysts, on average, forecast annual sales for the drug of around $700 million by 2023, according to Thomson Reuters data.
Ingrezza, or valbenazine, is designed to block a protein found in the brain that helps regulate the amount of dopamine released into nerve cells. Antipsychotic drugs are designed to block dopamine receptors, but in some patients the signal gets amped up and more dopamine is released in a region of the brain that controls movement.
Around 500,000 Americans suffer from tardive dyskinesia, Neurocrine Biosciences Chief Executive Officer Kevin Gorman said in an interview.
He estimated that, at best, around 100,000 of them would be treated with Ingrezza, but a more realistic level would be around 50,000.
Last week, Teva Pharmaceutical Industries Ltd's drug to treat chorea associated with Huntington's disease was approved by the FDA.
Teva is expecting the U.S. regulator's decision on the tardive dyskinesia indication by August.
(Reporting by Deena Beasley; editing by Jonathan Oatis, G Crosse)