WASHINGTON, May 18 (UPI) -- Analysts downgraded Neurocrine after its potential insomnia treatment indiplon was rejected by the Food and Drug Administration this week, but some still expect the drug to be approved eventually.
Some analysts had thought indiplon's approval was a certainty, but after the FDA deemed the 15 mg XR dose not approvable and the 5 and 10 mg doses approvable, many turned sour on the San Diego-based firm.
However, some analysts see a silver lining in the Neurocrine story.
David Woodburn, an analyst with Prudential, downgraded the stock, but he noted that he still thinks indiplon will win approval and reach the market in 2008.
"We are downgrading our rating on shares of (Neurocrine) not because we think that indiplon will never reach the market, but because it's likely going to take a long time for investors to regain confidence," Woodburn stated in a research report.
"With no guidance from the company, we are pushing an indiplon launch date (all 3 doses) out to January 2008," he added.
But by that time, the drug will face generic versions of Sanofi's Ambien.
"The uncertainty of launching after competing insomnia drug Ambien goes generic leads us to a 12-18 month price target of $35 (down from $66)," Woodburn said.
Neurocrine spokeswomen Elizabeth Foster told United Press International, "We can't comment past our press release."
The company said in a statement the reason the FDA gave for its decision on indiplon was that "they did not have an opportunity to review all of the information submitted during the NDA review cycles." The company added that it intends to work with the FDA to continue the development of the drug.
"While we are disappointed in the FDA action, we will move forward expeditiously to address FDA's outstanding questions regarding the applications," said Gary Lyons, Neurocrine's president and chief executive officer.
"We are heartened by the approvable action for indiplon capsules and are dedicated to working with the Agency to expedite response to the action letters," Lyons added.
R.W. Baird analyst Larry Neibor gave Neurocrine a "neutral" rating and readjusted his forecasts for indiplon revenues.
The drug now has a 33-percent likelihood of achieving a Lunesta-like 15-percent peak share and a 67-percent likelihood of capturing a Sonata-like 2-percent to 3-percent share, Neibor stated in a research report.
If indiplon does eventually get approved, it will be entering a challenging market.
"The quiet insomnia market has quickly become crowded," Neibor stated. Sepracor's "Lunesta has already been launched and is closing in on 15 percent of new prescriptions. The CR version of Ambien has been approved and launched and Sanofi is now marketing it heavily. Rozerem from Takeda has also been approved and launched."
However, Indiplon still has a good shot at success because there is a large unmet need in the sleeping aid market. "The insomnia market is relatively large at $2(plus) billion in current revenues, but is considered very underserved due to the poor selection of drugs that has been available," Neibor said.
In addition, the company has a strong marketing partner in Pfizer and a solid pipeline.
Pfizer "can be expected to be a major marketing force in the insomnia market," Neibor stated. "There will be an army of (Pfizer) detail reps plus the 200-person (Neurocrine) force that (Pfizer) is funding." This will enable Pfizer to target the primary physician market, while Neurocrine concentrates on psychiatrists.
Neurocrine's pipeline includes five compounds in phase 2 for a variety of indications. Its best hope may be a GnRH antagonist that it is developing for the treatment of endometriosis and BPH, Neibor said. Another compound that looks promising is Urocortin II, which it is developing for acute CHF treatment.
Other analysts downgraded the stock's rating and target price.
Piper Jaffray downgraded Neurocrine from "outperform" to "perform" and lowered the target price from $72 to $22.
CIBC World Markets reduced their rating from "outperform" to "perform," and Lehman Brothers analysts did likewise, dropping it from "overweight" to "equal weight."
