Tuesday, March 06, 2007

A Sleeper of a Deal

Insomnia: more than just another solid film by British writer/director Christopher Nolan. The $4 billion market is one of Big Pharma's thriving primary care playgrounds, home to some of the industry's wackiest DTC ads and a handful of lucrative deals.

Days never end. Nightmares are real. No one is innocent.

Eli Lilly said yesterday it was acquiring the private insomnia-focused biotech Hypnion to help boost its CNS pipeline. Terms of the deal weren't disclosed but IN VIVO has learned the transaction was all-cash and included no earn-outs. While Nolan's 2002 film grossed nearly $114 million we reckon Hypnion probably sold for more than twice that figure, even without having the benefit of Al Pacino or quasi-exotic Alaska locations.

It's not surprising that Hypnion's backers sold out--insomnia is an increasingly competitive space to play in, with large, expensive Phase III development programs (like Somaxon's multiple pivotal trials for Silenor).

Hypnion opted to sell rather than license in the wake of decent Phase II data for its lead candidate, HY10275, which were announced in January. HY10275 is a dual histamine/serotonin (H1/5HT2a) receptor modulator, a mechanism that may allow the drug to avoid scheduling by the FDA/DEA as a controlled substance. Currently marketed drugs, with the notable exception of Takeda's Rozerem (a melatonin receptor modulator) block the GABA-A receptor and according to regulators are potentially abusable.

The vast majority of the company's value was tied up in that compound and its backups & while the company's private investors have supported the company well thus far--it has raised nearly $90 million since inception in 2000--Hypnion was largely a binary bet. Licensing HY10275 would have left little for future public investors to chew on.

Lilly's been active in insomnia R&D at least since it licensed in pruvanserin from Merck KGAA in 2004. Pruvanserin, a serotonin receptor antagonist, is also in Phase II.

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