Drug Delay Drubs Neurocrine

The stock, no stranger to selloffs, plunges 30% after Indiplon sees another setback.
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Updated from 12:33 p.m. EST

Neurocrine Biosciences

(NBIX) - Get Report

saw its shares tumble Friday, a day after the company reported another delay for its experimental insomnia drug Indiplon.

On Thursday after the markets had closed, Neurocrine said it would seek government approval of an immediate-release version of Indiplon during the summer of 2008. In September, it predicted it would file an application for clearance with the Food and Drug Administration by the second quarter of 2007.

Following the announcement, shares of San Diego-based Neurocrine plunged $3.31, or 30%, to $7.72, a 52-week low. Trading volume was 10 times heavier than normal.

The FDA granted conditional approval in May for the immediate-release capsules. At the same time, the agency rejected Neurocrine's application for extended-release tablets. Analysts had forecast that extended-release Indiplon would have a greater sales potential because it was designed to help people stay asleep rather than just to help them fall asleep.

A month after the FDA ruling,

Pfizer

(PFE) - Get Report

cancelled its marketing deal with Neurocrine. Both events crushed Neurocrine's stock, whose high for the past year is $73.13.

The agency's conditions for approving immediate-release capsules included the need for Neurocrine to conduct additional analyses of data previously submitted to the agency. The company is continuing that work. The FDA also asked Neurocrine to conduct another test on how the drug is absorbed and excreted by the body and how it reacts with certain foods.

The FDA didn't want more clinical studies, but the company will conduct another three-month trial of the immediate-release drug's safety and efficacy in helping people fall asleep. The FDA does want more long-term safety and effectiveness studies for the extended-release tablets and the development of a separate dose for older people.

"Now that we have received clarification from the FDA on the requirements for Indiplon, we believe that Indiplon will be best served by focusing our resources on the resubmission of the

application to secure approval for

immediate-release capsules," CEO Gary Lyons said Thursday.

Conducting another clinical trial on helping people fall asleep will "ensure the highest probability for the success" for the application, he added. "We will be pursuing a sleep-maintenance claim for Indiplon to be filed as a separate application at a later date."

Neurocrine also released third-quarter financial results. For the three months ended Sept. 30, the company lost $39.1 million, or $1.03 a share, reversing a profit of $26.2 million, or 71 cents a share, for the same period last year. EPS figures exclude accounting for share-based compensation. Neurocrine took a one-time charge of $9.5 million during the recent quarter for severance and outplacement costs.

Third-quarter revenue dropped to $1.1 million from $64.7 million due primarily to a $50-million milestone payment from Pfizer during the year-ago quarter. Neurocrine expects to end 2006 with $180 million in cash, cash equivalents and marketable securities. It will have spent $100 million by year-end, and it expects to spend $80 million next year.

"We have reallocated resources and adjusted operating expenses in order to meet the funding requirements for continued development of our pipeline," Timothy P. Coughlin, the chief financial officer, said in a prepared statement. "We plan to continue to maintain a well-controlled

cash burn rate and will also review collaborative alternatives and outside funding strategies to achieve these goals."

Neurocrine is conducting clinical trials on several other compounds, including treatments for endometriosis, congestive heart failure and irritable bowel syndrome.