San Diego Business Journal

Neurocrine Biosciences, Inc. received news from federal regulators that it will likely be able to sell its sleeping pill, Indiplon, but only in low doses , causing its stock to drop more than 60 percent May 16.

While some financial firms downgraded Neurocrine stock, a few analysts pumped up its value, presuming it would bounce back. The San Diego company likely intends to resubmit an application to the Food and Drug Administration to get approval for the 15-milligram dose of Indiplon, said Neurocrine Chief Executive Officer Gary Lyons, in a 6 a.m. conference call announcing the FDA's response. Shares had dropped nearly $33 to $21.64 by mid-day.

The FDA said Indiplon in doses of 5 milligrams and 10 milligrams are "approvable," but Neurocrine had bet on the 15 milligram extended release dose to rack up a bigger share of the estimated $3 billion sleep-aid market.

While the approved doses will compete with several other sleeping aids, including Sanofi-Aventis' top-selling Ambien and Sepracor's Lunesta, the larger Indiplon dose would have had fewer competitors as an aid for interrupted sleep patterns.

Neurocrine said in its teleconference that it would not answer any questions until it speaks with the FDA and other "interested parties," presumably, New York-based pharmaceutical giant Pfizer, Inc., the co-developer of Indiplon, within the next couple of weeks.

"As soon as we have more information, we will release that and be transparent with our investors so that everyone is on track with what specific actions we are going to be taking that could influence our timeline for the rest of the year," Lyons said, adding that the news is a "short-term setback."

Lyons said in the call that Neurocrine officials were surprised by the decision, and that the FDA told the company it was not able to fully review supplemental information the firm had submitted late in the review process.

The FDA referred questions to the company, and a Pfizer spokesperson did not return a phone call in time for press.

Lyons said the company had received news of the partial approval late in the evening May 15.

Neurocrine nearly tripled its expenses last quarter to $19.5 million, with most of the increase related to creation of a sales force in anticipation of Indiplon approval. The company did not say if it would market the lower dosages without the 15-milligram dose.

Pfizer, whose stock dropped 14 cents on the news, provided more than eight times the amount of money last quarter to Neurocrine to gear up its sales force , $8.2 million compared with $1 million for the same period last year.

Neurocrine, which is the sixth-largest biotech firm in San Diego County with 364 local employees, has about 10 products in clinical trials.

The firm reported a net loss of $25.9 million for the first quarter, compared with $18.8 million for the same period in 2005. The company reported $264.5 million in first-quarter 2006 in cash on hand.

Neurocrine was founded in 1992 and began trading publicly on the Nasdaq stock exchange in 1996 under the symbol NBIX.