Insomnia made headlines last month by way of a company takeover, the purchase of drug rights in Europe, and mixed but intriguing Phase II results with a much-needed, potential new player in the $3 billion U.S. market.

It's a market ripe with unmet need, despite the availability of therapies. Users of the approved drugs often complain of impaired function the next day, and the elderly find themselves hard pressed to find a pill that will keep them asleep all night.

"Insomnia is a scary place" for companies, noted Natalie Taylor, analyst with Decision Resources. "It's not considered a severe enough disorder to handle all these me-too drugs, the same way the SSRIs did, with Prozac and Paxil. Ambien [zolpidem, the market leader from Sanofi-Aventis Group] basically works in everyone, and now it's generic. How much unmet need is there remaining?" Taylor recently authored a 182-page research report on the insomnia market.

Money-wise, the largest - though just barely - September item came from Sepracor Inc., which signed a deal worth up to $155 million, including $20 million up front, with GlaxoSmithKline plc for commercial rights to Sepracor's Lunesta (eszopiclone) in Europe and elsewhere. About six weeks earlier, Sepracor had filed for European approval.

In the U.S., post-marketing trials and an advertising push are trying to boost sales, Taylor told BioWorld Financial Watch, "and still the market is plateauing."

Word of the GSK deal, though, helped Sepracor's shares recover from a 28 percent stock hit taken in July, when second-quarter earnings turned out lower than expected and the firm reduced guidance for the rest of the year as well. Under the terms of the GSK agreement, $135 million more could be provided as milestone payments, and Sepracor gets escalating double-digit royalties. Sepracor sells the gamma-aminobutyric acid (GABA) modulator Lunesta in the U.S., and Eisai Co. Ltd. has licensed rights in Japan. The deal with GSK also excludes Mexico and Canada.

Ringing up a dollar amount just behind that of the Sepracor/GSK deal was the $151.8 million stock merger of Evotec AG with Renovis Inc., which puts together the former's pipeline of predominantly clinical-stage central nervous system drugs with Renovis' preclinical portfolio of products for CNS and related disorders.

Expected to close in the first quarter of next year, the transaction involves trading 34.57 million Evotec shares for 32.79 million Renovis shares. Evotec would issue American depository shares representing 1.0542 Evotec shares in exchange for each outstanding share of Renovis.

Evotec's lead compound is EVT 201, described as a partial positive allosteric modulator of GABA-A receptors, which met its endpoints in a 67-patient Phase II trial. More results from a Phase II trial in elderly insomniacs are expected this month, and the company is busy with partnering talks. A deal is likely next year.

The insomnia challenge has been met in various ways, with variable degrees of success and precision. Aside from Lunesta, GABA modulators on the market include extended-release Ambien CR, which targets a specific area of the GABA receptor, like the Phase II-stage NG2-73 (recently named adipiplon) from Neurogen Corp. Neurogen points out that its partial GABA agonist adipiplon is preferential for the alpha-3 subtype receptor, which is associated with anxiety relieving as well as hypnotic effects, whereas AmbienCR, like indiplon, is a full agonist targeting alpha-1. The company believes it's Ambien CR's alpha-1 selectivity that leads to impaired next-day function. Lunesta targets alpha-3, like adipiplon, but Lunesta is a full agonist with a long half-life, which can cause other problems.

In the same space is indiplon, the compound for which Neurocrine Biosciences Inc. resubmitted its new drug application in June. Neurocrine is asking the FDA to approve 5-mg and 10-mg capsules of immediate-release indiplon for adult and elderly insomnia, and hopes to launch the drug in early 2008.

GABA drugs are distinguished from each other mainly by half-life measures. Lunesta has a six-and-a-half-hour half-life, while immediate-release indiplon's is 90 minutes, which makes the latter less applicable to sleep maintenance but more applicable for those who need middle-of-the-night dosing, similar to Sonata (zaleplon), the remedy sold by King Pharmaceuticals Inc.

Another approach takes aim at serotonin receptors. MediciNova Inc. has a 5-HT1A agonist in Phase II trials, Acadia Pharmaceuticals Inc. has completed a proof-of-concept study with a 5-HT2A inverse agonist, and Hypnion Inc., recently acquired by Eli Lilly and Co., had completed a Phase II trial with its drug targeting histamine H1 and serotonin 5-HT2A. Yet another bid consists of Vanda Pharmaceuticals Inc.'s melatonin agonist VEC-162, which reported positive Phase III data late last year and detailed the results further in June at the Associated Professional Sleep Societies meeting in Minneapolis.

Somaxon Pharmaceuticals Inc. has Silenor (doxepin) pending with the FDA for elderly patients with primary chronic insomnia. The drug's active ingredient originally from Pfizer Inc., already is marketed as a tricyclic antidepressant and is available under such names as Adapin, Sinequan and Zonalon. In May, Somaxon said the agency wanted results from the company's ongoing 26-week transgenic mouse carcinogenicity study included as part of the initial new drug application submission - a demand that may result in a delaying in submitting the NDA until the first quarter of next year.

The provocative albeit not stellar results last month came from Arena Pharmaceuticals Inc.'s Phase II study with its 5-HT2A antagonist, APD125. Patients were given placebo, 10 mg, or 40 mg of APD125 for one week, separated by a seven-day to nine-day "washout" period.

Arena reported statistically significant improvements in several important measures: wake after sleep onset (WASO); wake time during sleep (WTDS); time in deep sleep; and number of awakenings and arousals. In line with the compound's mechanism of action, no effect of sleep onset materialized in the 173-patient trial. (A non-statistically significant trend toward longer time to sleep onset had turned up in an earlier, smaller study.)

Specifically, APD125 at the lowest dose improved WASO at nights six and seven by 7.7 minutes vs. placebo, a 15 percent improvement, where as the highest dose netted only a 4-minute improvement (p=0.19). That's not great, when set alongside WASO results shown so far by other drugs in the same class - but those drugs haven't been tested head to head with APD125, and the trials were designed differently, so accurate comparisons can't be made. WTDS hit statistical significance, too.

APD125 might shine in three main areas. One is next-day cognitive function, which stayed clear, with no "hangover" effect on patients using the drug - an important boon if it holds true in further tests. Another is its "non-scheduled" status.

Second, Arena's compound, unlike the GABA modulators Ambien and Lunesta, is not considered a candidate for abuse. The third potential leg up is APD125's performance in bettering deep sleep. Although data were not reported, Arena said the results were statistically significant. Ambien and Lunesta, on the other hand, have achieved only modest improvements in deep sleep.

The results could be enough to get a partner for APD125 before starting Phase III. Meanwhile, investor eyes also are tracking Arena's obesity drug, lorcaserin. Last month, an independent echocardiographic data safety monitoring board recommended that the firm continue its Phase III trial called BLOOM (standing for "Behavioral modification and Lorcaserin for Overweight and Obesity Management"). Lorcaserin's registration program involves two more Phase III studies, which Arena plans to kick off later this year.

"We couldn't predict a market launch for the drug in the next 10 years, because it's in early stage development and Arena doesn't have a partner," analyst Taylor said, pointing to a pair of drug candidates owned by Sanofi-Aventis that act on the same receptor as APD125 but have reached Phase III trials.

"I don't want to pop their balloon," analyst Taylor said about Arena. "We haven't seen any quantitative data" with the Sanofi-Aventis drugs, eplivanserin and the backup volinanserin, unlike ADP125. Such data are what makes the Arena compound exciting, she added.

"[The Sanofi-Aventis drugs] are not going to help patients fall asleep quickly," Taylor said, but they do carry benefits similar to APD125. "Based on what I've heard from Sanofi, they would probably go after elderly patients with these types of drugs, because they're at risk more for the hangover effect," she said. "They're more sensitive to side effects, they have to take lower doses of Lunesta and Ambien. We have [eplivanserin] launching in 2009, based on what the company has said."

Mainly that class of compounds will drive near-term growth in the insomnia market, with volinanserin likely hitting the market in 2011. Peak-year sales of eplivanserin could go as high as $1 billion, Taylor wrote in her report.

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