Watson Pharmaceuticals Inc. ( WPI ) along with partner Columbia Laboratories Inc. ( CBRX ) recently announced that the latter has transferred the new drug application (NDA) for progesterone vaginal gel 8% to the former. The companies are seeking to get the candidate approved for use in the reduction of risk of preterm birth in women with a singleton gestation and a short uterine cervical length in the mid-trimester of pregnancy.

The transfer does not involve any additional payment and following the transfer, Watson Pharma will have full rights and regulatory responsibilities for all activities relating to the application.

According to the original agreement entered into by the companies last year, Watson Pharma had acquired the US rights to progesterone vaginal gel and Crinone. Crinone is indicated for the treatment of infertility in women. According to the agreement, Columbia Labs receives royalties on net sales made by Watson Pharma. Outside the US, Crinone is marketed by Merck KGaA ( MKGAF ).

We note that last month, Watson Pharma and Columbia Labs announced that the US Food and Drug Administration's (FDA) advisory committee recommended against the approval of progesterone vaginal gel 8%. The companies had filed for the US approval of the gel in June 2011. The committee agreed that progesterone gel was safe but said that it needed more information in order to recommend the candidate for approval. The FDA's decision on progesterone gel is expected by February 26, 2012.

We view the negative recommendation as a concern, as the gel is one of the lead pipeline candidates at Watson Pharma. In case the US regulatory body chooses to go with the committee's recommendation, it would be a setback for the company.

We expect investor focus to remain on the approvability of progesterone vaginal gel.