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Merck, Lundbeck Scrap Insomnia Drug After Trials

Merck and H. Lundbeck said Wednesday they were ending studies of experimental insomnia drug gaboxadol due to disappointing effectiveness and worrisome side effects in late-stage trials.

Merck and Lundbeck said the side effects included dizziness, headaches, hallucinations and vomiting. In a mid-stage trial presented last summer, Merck said one of the most common side effects was tachycardia -- a rapid heartbeat that can be fatal, especially to patients with heart disease.

Shares of Danish drugmaker Lundbeck closed down almost 17% on Wednesday in Copenhagen. Merck, a far larger company with a wide array of medicines, was little changed in early afternoon trading.

"New safety data showed a dramatic increase in psychiatric adverse events at doses as low as twice the recommended dose, raising the possibility of real safety issues in sleep-drug abusers," Joseph Tooley, an analyst with A.G. Edwards, said in a research note.

Although earlier trials showed effectiveness in sleep onset and maintenance, the drug failed to do either in the latest trials, Tooley said. Moreover, he said a recent sleep lab study
failed to show sufficient effects at lower doses.

The medicine was among a number of new products that Merck has been counting on to ensure double-digit earnings growth by 2010, as the company continues to recover from the withdrawal in 2004 of its $2.5 billion-a-year Vioxx arthritis drug.

"While this represents a clear setback to Merck's late-stage pipeline, the company has other compounds in obesity, cardiovascular health and HIV that should provide revenue growth in the near term," Tooley said.

The companies said they no longer plan to seek marketing approval for gaboxadol, a drug that Cowen and Co. had predicted could garner annual sales of $500 million by 2012. Tooley had
expected it to fetch $463 million in 2011.

Data from the Phase III trials was expected in May, and Wall Street was counting on the drugmakers to file their marketing applications by mid-year.

"(We) do not see the loss as a major negative for Merck shares," said Natexis Bleichroeder analyst Jon LeCroy, noting he had expected annual peak sales of only $250 million for the
product.

Merck has said gaboxadol, which works through a different mechanism of action than current treatments, would probably be handled as a controlled substance. That means its distribution
would have been closely regulated because of a potential for addiction.

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