UPDATE 3-Cephalon stock drops after mixed drug trial data

* Delay follows mixed results of esophagus drug

* Cephalon shares drop 8.2 pct

* Cephalon delays decision on Ception acquisition

BOSTON, Nov 23 - Shares of Cephalon Inc, which makes the sleep disorder drug Provigil, fell more than 8 percent on Monday after a clinical trial of a potential new drug showed mixed results in patients with a rare type of inflammation of the esophagus.

The drug, Cinquil, was developed by privately held Ception Therapeutics Inc, to treat pediatric eosinophilic esophagitis, or EoE. Cephalon paid $100 million to Ception in January for an option to acquire the company and Cinquil, known generically as reslizumab, for $250 million.

"This eliminates one of the only sources of near-to-intermediate-term upside," said Thomas Russo, an analyst at Robert W. Baird, in a research note. "We recommend assuming that reslizumab will not be filed for approval in EE without another trial, if ever."

The drug had been expected to generate peak annual sales of around $500 million.

The companies have agreed to extend Cephalon's option exercise period until after results of a mid-stage trial of Cinquil in a different condition -- eosinophilic asthma.

The disappointing results come less than a week after a trial of a potential new drug for lupus also showed mixed results in a clinical trial.

The drug, Lupuzor, is being developed by British drugmaker ImmuPharma. Cephalon agreed in February to pay ImmuPharma $15 million for an option to acquire an exclusive, worldwide license for Lupuzor.

"Lupuzor is a long shot," said Avik Roy, an analyst at Monness Crespi Hardt & Co, in a research note. "The data were encouraging in parts, but early; and even if the drug were to succeed in larger trials, the earliest it could get on the market is 2015,"

Analysts expect Cephalon's shares to remain under pressure until it announces a new partnership or acquisition or until more clinical data, including data for Cinquil in asthma, is released later this year and early next year.

"We note that Cinquil was not included in our estimates and that due to the option structure of Cephalon and Ception's agreement, Cephalon's financial exposure to Cinquil is somewhat limited," said Chris Schott, an analyst at J.P. Morgan, in a research note. "That said...with Cinquil representing one of Cephalon's visible late-stage pipeline assets, we would expect the news to clearly weigh on sentiment surrounding Cephalon's shares."

The trial of Cinquil in EoE was designed to evaluate improvement in two co-primary endpoints. The first measured changes in the blood level of a type of white blood cell associated with the disease. The second measured changes in symptoms of the disease.

While there was a statistically significant reduction in white blood cells known as eosinophils in patients taking Cinquil compared to those taking a placebo, there was not a significant improvement in clinical symptoms.

Cephalon said the lack of statistical significance in clinical symptoms was due to the fact that there was also a strong improvement in symptoms in patients taking the placebo.

The study evaluated the drug in 226 children between the age of five and 18. About 80,000 children in the United States have EoE, according to the Journal of Clinical Investigation.

EoE decreases the ability of the esophagus to stretch, making it harder to swallow and absorb solid food.

Symptoms of the disease in children include abdominal pain, nausea, vomiting and a failure to thrive.

Cephalon's shares fell $4.89, or 8.2 percent to $54.72 in late morning trading on Nasdaq. (Reporting by Toni Clarke, editing by Dave Zimmerman) (