NEW YORK (CNNMoney.com) - The fast-growing sleeping-pill business could be in for a big wake-up call from Pfizer.

Pfizer (down $0.30 to $24.35, Research), the biggest drug company in the world, hopes to launch its experimental sleeping pill Indiplon this summer, just months before the top-selling drug on the insomnia market, Ambien from Sanofi-Aventis (up $0.30 to $45.85, Research), is set to lose patent production.

The shakeup comes as the market for sleeping pills is rapidly expanding. More and more Americans are taking sleeping pills and the drug companies are pouring money into advertising.

"The competition's heating up, but we do expect the market to expand," said Dallas Webb, analyst for Stanford Financial Group.

In the latest example of Big Pharma-biotech collaboration, Pfizer is partnering with Neurocrine Biosciences (down $0.82 to $59.11, Research), which developed Indiplon. Pfizer is awaiting the Food and Drug Administration's decision on Indiplon, expected next month, and analysts believe that the drug could become the biggest in the insomnia market.

"[Indiplon] is going to have the largest sales force in the world behind it," said Webb, who expects the $2 billion insomnia market to double by 2009, and Pfizer-backed Indiplon sales to peak at $1.4 billion that year.

The market is currently dominated by Ambien from the French drug giant Sanofi-Aventis (up $0.30 to $45.85, Research).

But recently, researchers from the University of Minnesota Medical School and the Mayo Clinic found that Ambien sometimes causes people to gorge on food while sleeping, with no memory of it afterwards.

But even if these allegations are true, they're not the biggest problem facing Sanofi's drug. Ambien is due to lose patent protection next year, so low-cost generic versions of the drug will be hitting the market.

Sanofi-Aventis hopes to recover some of the lost sales with Ambien CR, a controlled-release version of the branded drug that helps keep people asleep through the night, but analysts believe that Ambien's reign as the market leader is nearing an end.

Sanford C. Bernstein analyst Geoff Porges projects that Indiplon could be launched by the middle of this year, with sales growing to $2 billion by 2010. He says Ambien and Ambien CR sales will total about $2 billion this year but sink after that, squeezed by generic pressure and competition from Indiplon.

Bernstein analyst Gbola Amusa said the market will continue its fast-paced growth.

"You might have less competitive intensity than you think," said Amusa. "It will be competitive, but not to the detriment of players involved. There's room to grow for the entire business, and rising tides will lift all boats."

The prescription drug market for insomnia treatment jumped more than 20 percent in the first two months of 2006, according to SG Cowen, and Prudential projects that the insomnia drug market will grow by half through 2008.

But the expanding market hasn't happened by accident. Drug companies have launched an advertising blitz, which is credited in part with growing the industry.

Direct-to-consumer advertising for sleeping pills has jumped to $345 million in 2005, nearly six times its 2004 level, according to TNS Media Intelligence, an advertising research firm.

By now, most consumers have probably noticed the Lunesta butterfly in television ads. Lunesta, the number 2 sleeping pill from Sepracor (down $0.67 to $47.53, Research), is a potential blockbuster with fast-growing sales.

Sepracor spent $215 million advertising Lunesta in 2005, said TNS. But analysts say that Lunesta can't compete with Pfizer's marketing strength, especially since Indiplon is considered a strong product with few side effects. Amusa of Bernstein and Ian Sanderson, analyst for Cowen & Co., each project that Lunesta sales will reach $1 billion by 2010.

"Indiplon will be a formidable competitor to Lunesta," said Anderson. "We think it will require Sepracor to invest more heavily in sales and marketing behind Lunesta."

Another drug on the market, Rozeram, the world's first non-addictive sleeping pill from the Japanese company Takeda, could very well get overlooked given the strength of the blockbuster sedatives, analysts say. Amusa has projected $300 million in sales by 2010, and said the fact it's not addictive is hurting sales.

Amusa said that the sleeping industry could someday regain the strength it had in the 1970s, before the market deflated after the death of Elvis Presley, who was long-rumored to be a sleeping pill drug addict, though many of his fans still dispute the claim.

Elvis' death aside, many of the sleeping pills used at that time were barbiturates, which are used less frequently today because of increased awareness of their addictive properties and health risks.

"In the 1970s, the sleep market was much better than it is today," said Amusa. "I think one of the biggest cases [in causing an industry slowdown] was that Elvis died on the toilet with a bunch of sleep meds. This generation of sleep meds is much less dangerous and addictive than the ones in the 1970s."

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