Transcept Prepares to Resubmit NDA, Investors Rejoice

Transcept Pharmaceuticals announced on Wednesday that they plan to resubmit an NDA for their sleep drug Intermezzo to the FDA. The company said that they do not expect to run any new clinical trials and that the agency may complete a new review of the drug in two months. The FDA had originally cited safety issues with the drug, specifically in regards to a patient's ability to drive a car after taking Intermezzo the night before. In order to address this concern, Transcept is now recommending that patients should not drive within five hours of dosing, or within an hour after waking up. Investors are enthusiastic about the news, as the stock's price as doubled since the close Wednesday. McNicoll Lewis & Vlak analyst Christopher James had previously indicated that the fall in the share price represented a buying opportunity. He also stated that the efficacy of the drug is not in doubt as Intermezzo is a generic version of Zolpidem, a drug that has already been approved. Analysts had previously wondered whether the FDA would have asked Transcept to run more clinical trials, a murky proposal given that the company only had approximately $59.6 million in cash as of June 30, 2011. If approved, the drug would likely compete against first line drugs such as Ambien and Lunesta. Despite the positive news, Transcept still faces hurdles against Intermezzo market success. Unlike many first line insomnia drugs, which are taken prior to going to sleep, Intermezzo requires the patient to awake in the middle of the night to take the drug. This has led the FDA to ask safety questions regarding potential dosing errors as a patient may not be as cognizant at 2 AM as he or she would be during the day. Transcept responded to this problem by modifying the drug's packaging and only packing each dose individually. Doctors with knowledge of the drug have also questioned why patients would want to take a drug that requires them to awake in the middle of the night, when an insomnia drug should prevent that outcome from happening in the first place. Even if Intermezzo were to gain FDA approval, these doctors have stated that they will continue to prescribe first line treatments that keep patients asleep throughout the entire night. The FDA had requested that a patient use study be run for to ascertain the potential consequences; however, Transcept decided against it. The FDA has never approved a drug that requires waking in the middle of the night, so the company is taking a big risk by not establishing this fact. Insomnia is not a life threatening condition, nor is it lacking in treatment alternatives, so the FDA is not likely to show any leniency in the drug's approval. The company has failed to be transparent in disclosing the reasons for receiving a CRL for Intermezzo. The drug has already been rejected twice by the FDA, and investors have been left in the dark with regards to specific reasons. In addition, the company announced a restructuring in July and laid off 45% of its workforce in an attempt to save $1.1 million. In a previous note to clients, James predicted that sales of the drug could reach $315 million in 2020.