(Reuters) -- The U.S. Food and Drug Administration approved Danish drugmaker H. Lundbeck A/S and Japan's Otsuka Pharmaceutical Co Ltd's Rexulti, an anti-psychotic drug used to treat schizophrenia.
The drug, brexpiprazole, was also approved as an adjunctive therapy for major depressive disorder (MDD), the health regulator said on Friday.
The agency based its decision on seven clinical trials, three of which examined the drug's effect on schizophrenia and four testing it as an adjunctive therapy for MDD.
The drug will be available in the U.S. in early August.
Data from clinical trials showed that brexpiprazole was less likely to cause akathesia, a common side-effect of anti-depressants that leads to distress and restlessness.
Consensus forecasts from industry analysts point to annual sales of $1.4 billion for brexpiprazole by 2020, according to Thomson Reuters Cortellis, the life sciences division.
The approval comes at a good time for Otsuka, a unit of Otsuka Holdings Co Ltd. The company's U.S. patent for a similar anti-psychotic, Abilify, which is sold by Bristol-Myers Squibb Co in the United States, expired in April.
Abilify was one of Otsuka's main revenue drivers. It raked in $2.29 billion worldwide in 2013 before sales fell 12% the following year, according to Bristol-Myers' quarterly report.
The FDA, in April, allowed four companies, including Israel's Teva Pharmaceutical Industries Ltd, to begin producing generic versions of Abilify for mental illnesses such as bipolar disorder and schizophrenia.
Other promising schizophrenia drugs in development include Vanda Pharmaceuticals Inc's Fanapt (iloperidone), which was found effective in a relapse study last month, and Alkermes Plc's aripiprazole lauroxil, which the FDA will decide on in August.