Merck abandons insomnia drug study

Merck, partner Lundbeck, discontinue late-stage tests on sleeping drug gaboxadol.

By Aaron Smith, staff writer

NEW YORK ( -- Merck and its Danish partner Lundbeck said they discontinued studies on an experimental insomnia drug and will not be submitting it to the FDA.

Merck (down $0.29 to $43.36, Charts), a drug giant based in Whitehouse Station, N.J., and Copenhagen-based Lundbeck, said on Wednesday that they halted late-stage experiments with gaboxadol because tests have shown that it has no value as an insomnia drug.

While this is bad news for Merck, it's not disastrous. Joseph Tooley, analyst for A.G. Edwards, said that gaboxadol was not a major potential product for Merck. Before Merck and Lundbeck said they were discontinuing the study, Tooley had projected potential annual sales of less than $500 million in 2011.

Merck, and other members of Big Pharma have been trying to bolster their pipelines with more experimental drugs, as the billion-dollar blockbusters' - that have been driving the industry - patents expire.

Drug giants try to discover prospective drug compounds on their own, but many times they form mergers, partnerships and licensing agreements with smaller companies that have promising pipelines. Eli Lilly & Co. (down $0.30 to $52.97, Charts) recently announced its purchase of Lexington, Mass.-based Hypnion, which is experimenting with an insomnia drug called HY-10275.

The $2 billion insomnia drug market has been dominated by Sanofi-Aventis' (down $0.29 to $42.83, Charts) Ambien, but lately its been getting crowded with newer products like Takeda Pharmaceuticals' (down $1.56 to $66.48, Charts) Rozerem and Sepracor Inc.'s (down $0.10 to $46.81, Charts) Lunesta. The drug companies Somaxon and Vanda Pharmaceuticals (down $0.75 to $24.18, Charts) are also developing insomnia drugs.

Tooley does not own shares of Merck stock.

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