Sleepless nights for Somaxon: Will it find a partner for its insomnia drug?

On March 18, 2010, Somaxon Pharmaxeuticals (SOMX) was granted FDA approval to sell Silenor 3 and 6 mg. tablets for the treatment of insomnia characterized by difficulty with sleep maintenance. This approval was met with a stock price move from 4 to 10 dollars. Shares were only 30 cents just one year earlier. The stock has lost half its value since the day after FDA approval to just above 5 dollars.  Can the stock rebound or will the price continue to drop?

Silenor is a unique dose of the compound doxepin (Sinequan) which is available as a generic in 10, 25, 50, 75, 100 and 150 mg capsules and a 10 mg/ml concentrate liquid. Silenor’s mechanism of action is likely due to histamine blocking. This is a different mechanism from Ambien (Sanofi-Aventis (SNY)), Lunesta (Sepracor (SEPR)) and Sonata (King Pharmaceuticals (KG)) which work through the GABAalpha1 receptor or from Rozerem (Takeda Pharmaceuticals (TKPHF.PK)) that works through the melatonin receptor.

Frequency and subtypes of insomnia

Based on polls and surveys, insomnia affects about 35% of American adults. Chronic insomnia, manifested by insomnia more than 3 days a week, is estimated to affect about 10% of the population and is linked to poorer quality of life and mood disorders. Chronic insomnia can be subtyped into four groups. Sleep onset insomnia involves 3 or more nights a week where the sleep onset latency or the similar latency to persistent sleep (SOL or LPS) is over 30 minutes and sleep is fine during the rest of the night. Sleep maintenance insomnia can be defined as more than 30 minutes of wakefulness after sleep onset (WASO) is achieved for 3 or more nights a week. Combined insomnia involves both delayed SOL and increased WASO the same night more than 3 nights a week. Mixed insomnia is either delayed SOL or increased WASO for 3 nights a week. Studies requiring subjects to fill out a sleep diary every morning are likely more accurate than the more common larger phone surveys. One such sleep diary study found the percent of chronic insomnia patients with sleep onset, sleep maintenance, mixed and combined insomnia was 23%, 34%, 16% and 26%. In general, the elderly are more likely to have maintenance or combined insomnia while younger adults are more likely to have onset or combined insomnia.

Studies with Silenor

Silenor was tested in several Phase II and 3 phase III studies in adults and the elderly with chronic insomnia and in one other phase III study in adults in a phase advanced model of transient insomnia (summarized in the form 10-K, for 2008). Briefly summarizing the studies, significance in wakefulness after sleep onset and total sleep time (TST) was found in a dose dependent manner. However, improved latency to persistent sleep was generally only found for the higher dose on night one and not 5 to 8 weeks later. Because Silenor did not convincingly show efficacy for sleep onset, the drug is only approved for sleep maintenance. Ambien and Rozerem are FDA approved for sleep onset insomnia and Ambien CR and Lunesta are FDA approved for both sleep onset and sleep maintenance insomnia. Ambien (zolpidem) is only approved for short term use while Ambien CR, Lunesta and Rozerem are approved for any duration of use.

The drug was generally well tolerated with no significant increased adverse effect compared to placebo. This differs from the anticholinergic side effects commonly seen with the doses of doxepin used to treat depression (75 mg or higher) such as dry mouth, dry eyes, or persistent somnolence.

Opportunities

With over 25 million Americans suffering from chronic insomnia and more suffering from transient insomnia, the potential market is very large. Even if just the 8 to 9 million patients with pure sleep maintenance chronic insomnia are counted, sales could be huge. If one assumes a wholesale price of about $120/month and 10% penetrance, annual sales could break 1 billion. The side effect profile is excellent and patients taking Silenor are probably less likely to experience rare parasomnias such as sleepwalking or other sleep related activity that have been seen with Ambien and Lunesta. Additionally, unlike Ambien and Lunesta, Silenor will not be a scheduled substance with the DEA. This allows for more widespread product sampling. Most doctors prefer to write for non-scheduled drugs and Silenor prescriptions could be written for 12 months instead of only 6 months for Ambien or Lunesta.

Challenges

Doxepin is not a novel compound, though the 3 and 6 mg. Silenor products forr the insomnia indication will have patent protection for a while. The sleep market is dominated by generic and branded products and the off-label use of many drugs, including doxepin, is common. Generic doxepin 10 mg capsules are only 10 to 15 cents a pill. Liquid doxepin can easily be dosed at 6 mg with a dropper at pennies a day. Because the 10 mg dose has not been tested for insomnia, Silenor 6 mg can not claim superiority in either efficacy or tolerability against doxepin 10 mg. Indeed, their own data suggests that 6 mg might not be the optimal dose as 6 mg performed better than 3 mg which performed better than 1 mg. Could a higher dose have worked better? Obviously, Somaxon was not motivated to test the 10 mg dose as a new branded product since a generic already existed.

Even the lower doses have weak patent protection for the chronic insomnia indication. The in-licensed patent for the treatment of chronic insomnia, covering doses from 0.5 mg to 20 mg of Doxepin, will expire in 2013 (from the form 10-K for 2009). The in-licensed patent for the less commonly treated transient insomnia does not expire until 2020. Furthermore, they do not have patent protection outside the US.

Studies did not convincingly support a longer term benefit for Silenor in reducing the latency to persistent sleep. Therefore, the FDA only approved Silenor with the indication for the treatment of insomnia characterized by difficulties with sleep maintenance. Many insomnia patients have either sleep onset insomnia alone or both onset and maintenance insomnia. These patients would likely benefit more from other products. Sales representatives will not be able to market the drug for sleep onset, mixed or combined chronic insomnia. Doing so would risk penalties for off-label promotion. Also, because 6 mg was not tested against 10 mg or higher doses, Silenor reps will not be able to easily counter questions asking if the 6 mg dose is better (either in efficacy or tolerability) than the other off-label doses.

Conclusions

Silenor appears to be an effective agent for the treatment of pure maintenance insomnia that is safe and very well tolerated. These positive attributes are balanced by its inability to prove efficacy for sleep onset insomnia and the lack of data to distinguish itself from the off-label 10 mg dose of doxepin. All things being equal, doctors would prefer to prescribe an on-label non-scheduled product. However, insurance companies and prescription benefit managers have a nasty habit of taking cost into account. Paperwork is less when generics are prescribed. Hence, I seldom need to fill out additional forms for generic Ambien (zolpidem) or for the off label use of doxepin, trazodone, mirtazapine, gabapentin or other generic compounds. Indeed, many plans require that a patient fail zolpidem before being covered for one of the branded products that is FDA approved for insomnia. Additionally, many patients specifically ask for a generic compound over a branded one. The patients who may best benefit from low dose doxepin, the elderly, are also the patients most likely to request a generic compound and to be unable to afford their medication. Though Somaxon may offer coupons and vouchers that can help defray Tier 3 co-pays for privately insured patients, Medicare does not allow the use of these. In my experience, patients do not care whether a product is on-label or off-label as long as it is effective, and for most patients, affordable.

For all these reasons, I believe that Silenor will have difficulty achieving impressive sales. Marketing, manufacturing and regulatory expenses will take a big chunk out of sales. This has likely been realized by other pharmaceutical companies as no partner has come forward despite nearly 3 months passing since the FDA approval. Somaxon appears to still be counting on a partnership as they have not yet developed or rented their own sales force. Somaxon may be forced to take a less lucrative contract to cement a partnership. With no other compound in the pipeline, they must act soon as the clock is ticking with a potential patent challenge in 2013. If one is interested in taking a long position, a better entry may be at 4 dollars as this was the price before FDA approval and is just above the 200 day moving average. When it comes to investing in Somaxon, I will avoid taking a position and avoid the sleepless nights.