Intermezzo disappointment another rude awakening for Transcept

Transcept Pharmaceuticals’ second try with the FDA has gone no better than its first. The company has announced it expects the regulator to reject the insomnia drug Intermezzo again by tomorrow’s action date in spite of efforts to put to bed worries about residual drowsiness and double dosing

Shares in Transcept dropped 40% to a two-year low of $5.13 in early trade today, the day after executives of the California group acknowledged the safety worries following a teleconference with agency officials. Given that fears persist even after follow-up studies and revised packaging, it would be a major surprise if Transcept does not pull the plug on the middle-of-the-night sleeping pill.

Dwindling away

With the setback, Transcept looks certain to lose a $30m regulatory milestone promised from Purdue Pharma when it signed a licensing deal for Intermezzo; the Connecticut specialty pharma company guaranteed that amount only if Intermezzo were approved by June 30, 2010, with $2m knocked off for each month of delay. Approval this week would have put a diminished $6m in Transcept’s pocket.

The added delay now clearly jeopardises the future of Transcept's lead candidate, a sublingual low-dose reformulation of Sanofi's one-time blockbuster Ambien.

The FDA’s initial rejection of Intermezzo was based on concerns about double-dosing, use with less than four hours of bedtime remaining, and drowsiness during next-day driving (Transcept’s insomnia drug approval process turns into nightmare, October 29, 2009).

Transcept subsequently revised labelling, switched to single-tablet packaging to prevent confusion by sleepy patients over whether they had taken a dose, and conducted tests showing next-day driving effects slightly greater than that of a person with a 0.05% blood-alcohol concentration, an amount below the level of legal drunkenness under traffic laws in most of the US.

Whilst Transcept stated it would disclose more about the FDA’s objections after it receives the complete response letter, it did indicate safety as a concern. Zacks Investment Research analyst Jason Napodano, one of the few equity analysts who cover the company, wrote that Transcept executives told him that next day residual effects remain a major concern for the FDA.

Hard choices

With 40% knocked off its market capitalisation today, Transcept is now trading at near its cash levels of $63.3m at the end of the first quarter. Until more is known about the specifics of the FDA objection, it would be hard to say if Transcept will need to conduct more clinical trials, and if so, how extensive they will need to be.

What is likely is that more data than Transcept provided with the driving tests will be necessary. But it is hard to see that the company would pour potentially millions more into a reformulation of a product that has already lost patent protection, particularly given the heavy genericisation that already exists in the insomnia space.

Given the challenges Somaxon Pharmaceuticals faced in bringing its insomnia pill Silenor to market – unlike most pharma partnerships, the smaller company is paying a fee and royalties to hire the OTC sales force of consumer giant Procter & Gamble – the prospects must look daunting (Somaxon seeks to wake up Silenor launch with P&G alarm clock, August 26, 2010).

It could do well for Transcept to refocus on its pipeline; while not brimming with innovation, it has a phase II candidate in TO-2061, a low-dose reformulation of the chemotherapy anti-nausea medication ondansetron intended for treatment-resistant obsessive-compulsive disorders. Putting Intermezzo to sleep may be the best option.

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