Somaxon's Silenor Gains An FDA Approval, But Can The Pharma Afford A Launch?

Somaxon hopes to launch its insomnia drug in the second half of 2010, but is still searching for a U.S. commercial partner.

Cash-strapped Somaxon Pharmaceuticals celebrated an FDA approval for its insomnia drug Silenor (doxepin) on March 18, but the specialty pharma needs to find a U.S. commercial partner soon to execute its full launch plans.

"We must strengthen the balance sheet in order to support our future commercialization efforts and a launch in the second half of this year and we are currently evaluating financing options available to us," President and Chief Executive Richard Pascoe said on a same-day call to investors. He maintained that Somaxon is taking steps to ensure the drug can launch in the second half of the year and that talks with potential partners are ongoing.

But Somaxon, which announced its 2009 full year earnings the same day, only has enough funds to support its operations through the second quarter of 2010. Execs said they will need to obtain additional funds to finance operations beyond that point.

Somaxon recorded a net loss of $1.9 million, or $0.08 per share, in the fourth quarter 2009, compared to a net loss of $9.5 million, or $0.52 per share, for the same quarter in 2008. At the end of 2009, the pharma had $5.2 million in cash, cash equivalents and marketable securities. Now, Somaxon must also make a $1 million approval milestone payment to Procom One, from which it licensed Silenor.

Despite funding uncertainties, the pharma remains optimistic about Silenor's potential. The FDA approved Silenor for the treatment of insomnia characterized by difficulty staying sleep. The label, which execs maintained is "very attractive," enables Somaxon to promote the drug for the treatment of both transient (short term) and chronic (long term) insomnia in adults and elderly patients.

Execs believe the drug has a competitive edge given that it is the only prescription sleep aid approved for sleep maintenance into the seventh and eighth hour of rest that is not a scheduled controlled substance, meaning it does not carry a risk of abuse. The drug also has not been shown to cause side effects after waking. Somaxon is hoping to position Silenor as a first-line therapy for people with sleep maintenance insomnia and is relying on a sampling initiative to grow patient use.

Standard & Poor's Equity Research analyst Jeffrey Loo lauded Silenor's approval, raising his share rating for Somaxon from "hold" to "sell" in a March 18 note.

"We are surprised by the approval in the adult population, as the prior two NDAs were not approved on lack of sustained efficacy data, and had expected only potential approval for the niche elderly segment," he said.

Somaxon received its second "Complete Response" letter for Silenor last December, in which the FDA cited efficacy concerns (Also see "Somaxon Sleep Aid Silenor Not Effective, FDA Says" - Pink Sheet, 7 Dec, 2009.). To resolve these concerns, Somaxon said it performed additional statistical analysis on the data from its clinical development program and discussed with FDA the totality of the data and the overall benefit/risk assessment.

Somaxon aims to target psychiatry perscribers

Somaxon's goals now include securing a U.S commercial partner for Silenor and building its own organization, which execs believe would be capable of launching primarily into the specialty market. They explained that approximately 44,000 physicians write more than half the prescriptions for insomnia drugs in the U.S., with the psychiatry audience driving about 30 percent of the market.

Given these numbers, Somaxon believes specialty physicians could be "effectively covered" with 50 to 100 sales reps, though execs said "the size and structure of our organization will result in large part on our conversations going forward with potential partners."

Given the generic competition in the insomnia market - Sanofi Aventis' market leading sleep aid Ambien (zolpidem) went generic in 2007 -Somaxon will need to actively differentiate Silenor from available therapies. So far, the pharma appears to have a good chance, given that other drug makers attempting to gain an FDA okay for sleep maintenance therapies have had regulatory hold-ups.

Transcept Pharmaceuticals' Intermezzo (zolpidem sublingual tablets), a low-dose version of zolpidem that could be taken in the middle of the night, received a complete response letter last year, as did Sanofi Aventis' Ciltyri (eplivanersin). In February, Sanofi withdrew its NDA for Ciltyri .

"Since 2008, we have seen a steady decline in a promotional spending in the category, as well as a marked reduction in direct sales force effort," Pascoe said. "As a result we believe we can disseminate our messages about Silenor to both physicians and insomniacs without the massive marketing spend that was associated with the category only a few years ago."

-Carlene Olsen ([email protected])