Eli Lilly and Incyte say they are planning to refile their FDA-rejected arthritis candidate baricitinib before the end of January, setting up a possible approval in the middle of 2018.

That suggests the FDA has waived the need for a new clinical trial and means the new timeframe for the JAK inhibitor—once tipped as a top drug launch for this year—is not as lengthy as originally feared. It still puts the drug around a year behind its original schedule however.

Lilly and Incyte said they "anticipate the FDA will classify the application as a Class II resubmission, which will start a new six-month review cycle." That shortens the time before baricitinib can mount a challenge to Pfizer's JAK inhibitor Xeljanz (tofacitinib), heading for blockbuster status this year with sales up more than 40% to $587 million overall in the first six months of the year, despite a slow start.

It also reduces the chances that baricitinib will be leapfrogged by other JAK inhibitors in late-stage testing, notably Gilead Sciences' filgotinib and AbbVie's upadacitinib which have both been tipped as future blockbusters.

The two partners confirm that the dossier will include new efficacy data as well as evidence for the drug's safety. The FDA's complete response letter (CRL) for baricitinib expressed concerns about thromboembolic events seen in phase 2 and phase 3 trials of the drug.

Pfizer has always maintained that it has not seen any evidence of thrombosis with Xeljanz, and analysts have suggested that if the issue turns out to be specific to baricitinib it would relegate the drug to also-ran status in the JAK inhibitor category. Prior to the CRL, peak sales predictions for baricitinib were around $2 billion.

Nevertheless, the news is a fillip for Lilly and Incyte, with shares in both companies rising in out-of-hours trading today.

"We are pleased with the opportunity to provide our resubmission package for baricitinib sooner than anticipated and look forward to continuing to work with the FDA as we seek to bring baricitinib to people with RA in the U.S.," said Christi Shaw, president of Lilly Bio-Medicines.

Analyst Josh Schimmer of Evercore ISI said in a research note that the refiling for the drug will include both doses of baricitinib tested in trials—2mg and 4mg—adding: "one important thing to watch is whether the higher 4mg dose gets approved; it looks like it has slightly better efficacy than the 2mg baricitinib dose and potentially slightly more efficacy than Xeljanz. If that’s the case, then there could be switching off Xeljanz to baricitinib (and ultimately other JAK inhibitors too)."

Baricitinib was approved in Europe in February and in Japan last month under the Olumiant brand name, and is just starting to roll out onto the market. Sales so far have been small at just $4.8 million in the second quarter.