Event - Somaxon awaiting decision that could wake it from slumber

Somaxon is bracing itself for the outcome of the second FDA review of its insomnia product Silenor, and with cash running short anything other than a clear green light will be decidedly bad news.

The company ended September with $5.4m in the bank, which it reckons will last through to the second quarter of 2010, so even if approval is granted by the December 4 PDUFA date a partner will need to be found quick smart. Somaxon shares have jumped 29% this week to $2.84 and if the news is good the stock will no doubt travel higher. However, if another road block is placed on the path to market it is hard to imagine how the company could continue, an eventuality that will be swiftly reflected in its share price.

Only for the brave?

The insomnia market is certainly considered only for the brave by many commentators. The area is already heavily dominated by generically available medicines, the most notable recent loss of patent protection was Sanofi-Aventis’ $2.5bn Ambien in 2007. Since then pretty much all other branded contenders have struggled, including the controlled release version, Ambien CR, and Sepracor’s Lunesta, which is perhaps more famous for its hugely expensive marketing campaigns than commercial success.

There have not been any significant approvals in the insomnia market since Lunesta and Ambien CR in 2005. The fact that Somaxon only has a market value of $59m suggests that not many people believe Silenor is going to be the next blockbuster of the field.

Unfortunately, the drug’s first complete response letter received in February this year requesting data on any potential effects on the heart, did not helped build confidence (Somaxon reeling from Silenor rejection, February 27, 2009).

The setback for Transcept last month probably reinforced many fears, however, Somaxon is pretty confident that particular curve ball is not heading its way (Transcept’s insomnia drug approval process turns into nightmare, October 29, 2009). Transcept’s product Intermezzo, which it is trying to get approved for middle of the night waking, has been delayed by a request from the FDA for more safety studies, including next day driving tests, to make sure that there are no residual effects.

Somaxon believes that because Silenor is taken before bedtime, whereas Intermezzo is taken in the middle of the night, the regulator will not hold the same concerns. Additionally, the complete response letter received in February said specifically that there were no safety concerns that would preclude approval of Silenor; although of course the FDA has been known to change its mind.

Commercial niche

Somaxon believes Silenor has a chance to become a commercial success in a heavily genericised market for a number of reasons, including a benign side effect profile and efficacy data. Importantly, the drug is not a controlled substance like the GABA agonists, for example Lunesta, which could give an advantage when it comes to marketing and formulary status.

Silenor is low dose doxepin, the active ingredient used in a number of topical treatments for pruritis, or itching, and works by blocking histamine, which is involved in the body’s sleep and wake cycles. Because it is not a strong sedative like Ambien and Lunesta it does not have effects the next day, and with many people thought to suffer from insomnia, but reluctant to take the very heavy tranquilisers available, some commentators believe it should be able to find its niche.

Should FDA approval be granted, Somaxon believes a launch early in the first half of next year would be possible, pending a partnership of course, and talks are said to be under way. However, with Somaxon’s market value so low and its financial situation so precipitous, the company is not in a position to strike a hard bargain.

Any share price jump on approval would provide the opportunity to raise some more funds and allow the company to seriously consider offers without the Sword of Damocles hanging overhead. Any further delay, and that sword will swiftly drop.

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