Eli Lilly has snapped up a small US privately-owned drugmaker in a bid to get hold of what it believes will be a highly promising insomnia drug.

The Indianapolis-based drugs giant is acquiring Hypnion, a Massachusetts-headquartered neuroscience drug discovery company which focuses on sleep disorders. The deal, for which financial terms were not disclosed, is expected to close before the end of the first quarter.

Hypnion was founded in 2000 and has 25 staff who have developed their own drug discovery technology platform, called Score, but the jewel in the firm’s crown is HY 10275, a dual-acting compound which targets histamine H1 and serotonin 5HT2a. The firm says that it recently met primary and secondary endpoints in an initial Phase II clinical trial at doses of 1mg and 3mg in adults with transient insomnia.

When the trial data came out at the beginning of January, Hypnion noted that HY10275 “was rationally designed to ‘let you sleep’ rather than depress the entire brain to ‘make you sleep’," and this dual-acting receptor activity and the lack of affinity for undesired off-target receptors “are thought to account for the compound’s excellent efficacy and tolerability profile.”

The company noted that it also has other clinical candidates that have proven themselves to have “distinct advantages in efficacy and safety over the market leaders in insomnia and fatigue,” including Sepracor's Lunesta (eszopiclone), Sanofi-Aventis' Ambien (zolpidem) and Cephalon’s Provigil (modafinil).

Steven Paul, Lilly’s executive vice president, science and technology, said the acquisition boosts the firm’s “substantive presence in the area of sleep disorder research." Although it has no insomnia products on the market, Phase II trials are being conducted into pruvanserin, a compound acquired from Merck KGaA in 2004.

Hypnion’s chairman, Nick Galakatos, said the deal made good sense as “we recognised that a partnership with a leading pharmaceutical company was our best strategy for moving forward quickly.” Lilly noted that the acquisition will result in a charge to earnings not exceeding $0.30 per share for Hypnion's in-process R&D and the transaction will be funded by existing cash balances.