Washington Editor

The FDA delayed approving an immediate-release version of the sleep drug indiplon and rejected a modified-release formulation, actions that on Tuesday crushed the stock of Neurocrine Biosciences Inc.

On Tuesday, the company lost 62 percent of its market cap, with shares (NASDAQ:NBIX) plunging $33.87 to close at $20.76.

"The FDA response was a surprise to us," Neurocrine President and CEO Gary Lyons said during a conference call, although he did not signal a rush to the lifeboats. Instead, he called the matter "a short-term setback" and pointed to "the ultimate success of this product and a timely commercialization."

The San Diego-based company said the FDA determined that 5-mg and 10-mg capsules of immediate-release indiplon are approvable - although it was not immediately clear what, if any, additional work might be required - and rejected the 15-mg modified-release tablets. The agency declined to comment on its decisions.

But failing to get a regulatory endorsement for the modified-release version, which would be indicated for sleep maintenance, is largely what damned the company's valuation in the eyes of investors. Jason Napodano, an analyst with Zacks Investment Research Inc. in Chicago, had projected that 85 percent to 90 percent of total sales would come from that formulation.

"We don't know why the FDA rejected the drug," he told BioWorld Today, but gave two potential explanations. "It's possible that they just didn't submit enough data," meaning that Neurocrine might have to repackage existing material or conduct another study to generate missing data. Or, he said, it's possible that too much material was submitted, and "the FDA did not have enough time to review the data."

Lyons suggested the latter scenario is playing out; the company said the FDA indicated that it did not have an opportunity to review all the information in its allotted time. The drug's clinical development involved more than 8,000 patients, and "perhaps because of the size and complexity of this," Lyons said, "the agency will require additional time with us."

Of note, the FDA had until Monday to complete its review of immediate-release indiplon per requirements under the Prescription Drug User Fee Act, and its action date on modified-release indiplon was June 27. But the agency chose to complete its review of both by the earlier action date.

Of course, the FDA could have delayed a decision for three more months, as it's sometimes wont to do.

"The fact that it didn't" explains the huge stock drop, Napodano said, noting that investors fear Neurocrine is facing additional study requirements and a potential two-year delay.

Lyons noted that the company would soon meet with the FDA to discuss the applications in order to clarify and determine the steps required for full approval.

Neurocrine began filing for approval of immediate-release indiplon a year and a half ago and submitted a separate new drug application for the modified-release formulation shortly after. The product's Phase III program included 16 trials. (See BioWorld Today, Oct. 20, 2004.)

The drug, a non-benzodiazapine agent, is partnered with Pfizer Inc., of New York, in an agreement worth up to $400 million. Neurocrine, which received a quarter of that amount at the outset, stood to receive a $30 million milestone payment had the immediate-release capsules been approved and a $75 million milestone payment for the modified-release tablets. (See BioWorld Today, Dec. 20, 2002.)

Napodano said in a worst-case scenario, Neurocrine would have to conduct additional clinical studies and Pfizer would abandon ship. "That would essentially kill the drug," he said, with Neurocrine left holding damaged goods. "I don't think Neurocrine could bring this thing to the market without Pfizer."

Indiplon's setback bolstered shares in Sepracor Inc., the Marlborough, Mass.-based company that makes another sleep drug, Lunesta (eszopiclone). Its stock (NASDAQ:SEPR) jumped $6.28, or 14 percent, to close at $51.10.

The insomnia space is led by immediate- and extended-release versions of Ambien (zolpidem), a blockbuster product from Paris-based Sanofi-Aventis Group.

Indiplon was discovered by Madison, N.J.-based Wyeth, and two years ago Neurocrine paid $95 million in cash and stock to buy out Wyeth's interest. (See BioWorld Today, March 1, 2004.)

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