Is The FDA Easing Up? How one company turned a rejection into a thumbs up, and what it could mean for the drug industry as a whole.

After the Food and Drug Administration told Vanda Pharmaceuticals that the company's schizophrenia drug was "not approvable" last July, Wall Street marked the tiny biotech for dead.

The FDA asked for a new clinical trial; Vanda insisted it could change the agency's mind with its existing data. Its shares sank from $4 to 45 cents. A hedge fund, Tang Capital Partners, started a proxy fight to try and get Vanda to liquidate and distribute the proceeds to shareholders.

Then Wednesday night, the FDA announced it was approving the drug, Fanapt, based on data from 3,000 patients. Vanda shares exploded 700% to $8. That's the kind of jackpot that could start getting investors interested in gambling on tiny biotechs again.

But the Vanda story may signal something far more important for investors than just a reminder that biotech stocks can pop: an easier FDA. Both Wyeth ( WYE - news - people ), which is being bought by Pfizer ( PFE - news - people ), and Schering-Plough ( SGP - news - people ), which is being bought by Merck ( MRK - news - people ), were rebuffed last year by the FDA after submitting data for schizophrenia drugs.

READ MORE @ FORBES

UPDATE 3-US lets drugmakers advise doctors on unapproved uses

U.S. health officials finalized guidelines that allow pharmaceutical companies to tell doctors about unapproved uses of their medicines, a practice opposed by critics of industry marketing.

The Food and Drug Administration (FDA) guidelines allow manufacturers such as Pfizer Inc (PFE.N) and Merck & Co (MRK.N) to distribute copies of medical journal articles that describe unapproved uses. The action could help companies expand the markets for medicines and medical devices.

The move, announced a week before Republican President George W. Bush leaves office, puts in place a policy that drew objections from congressional Democrats and drug-industry critics when it was proposed last year. Opponents say it will allow promotion of uses without adequate testing.

By law, manufacturers are prohibited from marketing their medicines for uses not approved by the FDA. But doctors can prescribe drugs for any use they see fit, a practice known as "off-label" use.

Distribution of medical literature suggesting a drug may have merit for an unapproved use is a marketing area that has been in dispute for years.

READ MORE @ REUTERS

Child Psychiatrist to Curtail Industry-Financed Activities

A prominent Harvard child psychiatrist will curtail activities financed by the drug industry while Massachusetts General Hospital investigates his failure for years to disclose the consulting fees he received from drug makers.

The psychiatrist, Dr. Joseph Biederman, a world-renowned and controversial researcher on childhood mental illness, has agreed to stop participating in speaking engagements and other activities paid for by pharmaceutical companies, and also to stop his work on industry-financed activities within the hospital. That includes clinical trials that are under way at the hospital, said Peggy Slasman, a spokeswoman for Massachusetts General.

READ MORE @ N.Y. TIMES