Drugmaker XenoPort Inc and partner GlaxoSmithKline Plc said the U.S. Food and Drug Administration had approved their drug to treat shingles-related nerve pain.
However, XenoPort's shares fell as much as 13 percent on concerns that a contractual dispute between Xenoport and GSK over the drug, Horizant, could now take longer to resolve, RBC Capital analyst Michael Yee said.
The two partners are in a legal battle after XenoPort alleged that GSK had breached a contractual obligation.
The approval for the drug, which is already approved to treat restless legs syndrome (RLS) in the United States, makes it less likely that GSK will give Horizant back to XenoPort in the near term, Yee said.
"GSK has more reason to market (the drug) and keep it now and giving it back right away would seem awkward," he said.
The fall in XenoPort's stock price also suggests investors are cashing in after a strong run-up over the last month, Yee said.
XenoPort's shares, which were down 4 percent at $5.85, had risen 29 percent in the month to Wednesday.
XenoPort will get a milestone payment of $10 million from GSK following first sales of the drug to treat post-herpetic neuralgia (PHN) in adults.
Post-herpetic neuralgia follows the healing of an outbreak of herpes zoster, commonly known as shingles.
About 1 million people in the United States develop shingles each year and about 10 percent of those develop PHN.
In a 12-week, controlled study on patients with PHN, drowsiness and dizziness were the most frequently reported side effects.