Analysis: Pfizer's exit may kill indiplon

By STEVE MITCHELL, UPI Senior Medical Correspondent  |  June 23, 2006 at 4:38 PM
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WASHINGTON, June 23 (UPI) -- Pfizer's decision to end its deal to develop indiplon will have negative consequences for Neurocrine and could spell the end for the sleep aid that was at one time a much-heralded prospect.

Barbara Ryan, an analyst with Deutsche Bank, told United Press International Pfizer's move was expected due to the Food and Drug Administration's decision to issue a non-approvable letter for the highest dose of indiplon in May.

"We thought Pfizer would walk away, so it's completely consistent with that," Ryan said.

"Obviously, it's bad for Neurocrine," but the impact on Pfizer is expected to be minimal, she said. Pfizer's stock was down a penny in Friday trade.

Pfizer might look to acquire Sepracor, which makes the sleep aid Lunesta, in an attempt to replace the potential lost by indiplon, but it's anybody's guess whether the company will actually follow through.

"I wouldn't be surprised either way, if they did or if they didn't," Ryan said.

As for indiplon, the drug may have missed its window of opportunity.

"The prospects, over the course of time, for this drug have diminished," Ryan said. Generic competition for Lunesta and Sanofi Aventis' Ambien "will put pressure on this whole market," she said.

In response to Pfizer's decision, Citigroup reduced its rating of Neurocrine from hold to sell, saying Pfizer's exit was "highly detrimental" to the company.

Citigroup analyst Elise Wang agreed indiplon's window of opportunity may have closed.

"We believe there is heightened uncertainty as to the timing if not the likelihood that Indiplon may successfully be commercialized at all," Wang stated in a research report.

Neurocrine "now faces significant strategic challenges and will need to reassess its internal programs in order to manage its operating expenses," Wang added.

However, Prudential analyst David Woodburn said indiplon could still have a future and Pfizer's exit may be more of a positive for Neurocrine than if Pfizer had renegotiated the terms of the deal.

"The Street will likely view this as a nail in the coffin for indiplon, though we still think there's an opportunity there," Woodburn stated in a recent research report. But keeping indiplon alive will require Neurocrine finding a co-developer.

"We don't see any scenarios where it would make sense for (Neurocrine) to try and launch indiplon (in any form or dose) by themselves, so a partner would likely pick up most commercialization costs, thereby preserving (Neurocrine's) capital," Woodburn stated.

"The next significant event for (Neurocrine) should be a meeting with FDA on indiplon," he added.

That appears to be what Neurocrine has in mind. The company did not return a phone call from UPI requesting comment, but it said in a statement issued late Thursday that it "will meet with the Food and Drug Administration to finalize development plans for the resubmissions of each indiplon NDA and plans to commercialize indiplon as quickly as possible upon approval."

Gary Lyons, Neurocrine's president and CEO, said, "Neurocrine is fully committed and prepared to develop and commercialize this product."

Lyons added, "We believe that full rights to indiplon, together with our R&D pipeline which is advancing several phase 2 products, provides additional value and partnering opportunities."

The pipeline compounds include altered peptide ligand, or APL, for diabetes and the gonadotrophin-releasing hormone antagonist NBI-56418 for endometriosis and benign prostatic hyperplasia.

Bank of America analyst Chris Schott said his models project the impact on Pfizer would be minor. "We view this event as a modest negative for (Pfizer) given the 50 percent economics of the JV and significant marketing expense," Schott stated in a research report.

"Removing Indiplon from our model, lowers our (Pfizer) EPS estimates by $0.01 in 2007, and $0.02 annually in 2008-2010," he added. "Other modest modeling updates result in an additional $0.02 cut to our 2007 forecasts."

Currently, Pfizer shares are undervalued, Schott said in rating the company a buy.

"Pfizer is trading at more than a 20 percent discount to the Major Pharma group," he noted. "We believe at these levels concerns on Lipitor share erosion are more than reflected in Pfizer's current share price."

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