Editor

Pfizer Inc.'s decision to back out of its potential $400 million deal struck in 2002 with Neurocrine Biosciences Inc. was no surprise after Neurocrine said more trials likely would be needed for indiplon, the insomnia drug at the center of the licensing agreement, to win approval.

But news of another partner for indiplon should come as no surprise, either, once the regulatory smoke clears - but probably not before. Meanwhile, Neurocrine is shopping around for another product that might provide revenue and justify keeping the 200-person sales force hired for indiplon.

Pfizer decided not to wait for a meeting with the FDA to clarify the approvable letter for its 5-mg and 10-mg immediate-release indiplon capsules or for separate talks regarding the non-approvable letter for a 15-mg modified-release tablet formulation. Under the termination deal, Pfizer is reimbursing Neurocrine for up to 180 days of its share of expenses related to establishing the sales force.

The original deal included an up-front fee of $100 million upon the signing, with Pfizer agreeing to fund development costs and pay milestones of up to $300 million, along with undisclosed royalties and co-promotion fees.

Next month brings the meeting with regulators for indiplon IR, but no date for the MR formulation has been disclosed. In June, Neurocrine said preclinical and clinical data with indiplon capsules will be reanalyzed for sleep initiation and middle of the night dosing, and the safety results in elderly patients will get another look. Regarding the tablets, the firm said efficacy data might not be good enough for the 15-mg dose (since most trial data submitted to the FDA involved higher doses). The agency also wants more safety and efficacy sifting of work related to the tablets.

Last week, Neurocrine provided an update on the indiplon program as part of its second-quarter earnings report, but didn't offer any guidance about when trials would start, or what sort of studies might be done. Neurocrine chalked up a loss for the quarter of $27.4 million, or 73 cents a share, compared with a loss of $5.6 million, or 15 cents per share for the quarter a year ago. Revenue dipped to $9.2 million from $33.2 million. Thomson Financial analysts had forecast a loss of 72 cents per share on revenue of $22.9 million. The company has about $234 million in cash, cash equivalents and marketable securities.

Ill-fated indiplon, a non-benzodiazapine agent that acts on a specific site of the GABA-A receptor, represented what Atlas Venture Ltd.'s Peter Barrett once called a "de-prioritized asset" at Wyeth that DOV Pharmaceutical Inc. licensed, developed somewhat further, and then licensed to Neurocrine, which parlayed the drug into the whopper Pfizer deal.

If indiplon ultimately wins approval - which seems likely despite the hurdles - its main competitor would be Sepracor Inc.'s Lunesta (eszopiclone), approved in December 2004. Last month, at the annual meeting of the Associated Professional Sleep Societies in Salt Lake City, Sepracor bolstered Lunesta's standing with more data in oral presentations of results from a Phase IIIb/IV study.

Also coming up in the insomnia space is Somaxon Pharmaceuticals Inc., which took lead product Silenor (doxepin) into the first of two Phase III trials in June 2005, days after raising $65 million in a Series C financing. Silenor's active ingredient currently is prescribed at high doses for depression.

In December, Somaxon priced its initial public offering at $55 million (5 million shares at $11 per share), and in April, the firm released positive Phase III data showing 3-mg and 6-mg doses of Silenor produced statistically significant results in adults with chronic insomnia.

Current market leader Ambien (zolpidem), from Sanofi-Aventis Group, is indicated for sleep onset only, while Lunesta won a label for sleep onset and maintenance. An advantage for Silenor is that, unlike Ambien, it is not classified as a Schedule IV controlled substance, drugs authorities want to better control because of the possibility of abuse (although Ambien is said to have less potential for abuse than drugs in the benzodiazepine class).

Among others to make news lately in insomnia is Vanda Pharmaceuticals Inc., which last month offered data from a Phase II study of VEC-162 in a model of transient insomnia showing a statistically significant shift in circadian rhythm at 50 mg and 100 mg of up to five hours in the first night and a statistically significant dose-response curve. The study involved 37 healthy subjects, and also showed that all dose groups of VEC-162 experienced a reduction in time to achieve persistent sleep over placebo. VEC-162 is a melatonin agonist that since has entered Phase III studies.

Arena Pharmaceuticals Inc. has a compound at an earlier stage and reported data last month. In Phase I trials, APD125 showed what Arena described as an "excellent" safety and tolerability profile and significantly improved sleep parameters in normal healthy volunteers, including slow wave (or deep) sleep associated with better sleep maintenance. The compound did not impair next-day psychomotor skills or memory, Arena reported at the Salt Lake City sleep meeting.

Indiplon's setback opened the way, too, for Questcor Pharmaceuticals Inc.'s Doral - brand name not only of a cigarette but also of quazepam, a long-acting benzodiazepine for insomnia due to become the only marketed agent in its class when Questcor begins pushing the product in the third quarter. Questcor in May acquired Doral from MedPointe Inc. for $2.5 million in cash and a future milestone payment of $1.5 million.

The shuffle in the insomnia market is sure to keep investors awake and, with indiplon, Neurocrine might have a hard row to hoe. But the company has several other programs in development behind it, including NBI-56418, the gonadotropin-releasing hormone (GnRH) receptor antagonist in Phase II studies for endometriosis. Three-month data recently proved positive, and Neurocrine expects to move into an expanded six-month Phase IIb study later this year.

Also in Phase II is the Type I diabetes drug, NBI-75043, and the urocortin 2 drug in congestive heart failure. A corticotrophin-releasing factor antagonist is readying to start Phase II in anxiety and depression, partnered with GlaxoSmithKline plc.