US drug developer Neurocrine Biosciences said on Friday its insomnia treatment indiplon would need additional clinical testing before securing approval in the USA, prompting a slump in its share price.

Prospects for indiplon already looked shaky after the US Food and Drug Administration (FDA) said in September the company would need to carry out another trial of the high-dose tablet formulation of the drug – believed to be the most commercially viable – and asked for more information on two lower doses.

Neurocrine’s development partner for indiplon, Pfizer, took that as a signal to bail out from the collaboration, although Neurocrine insisted it would press on with the compound.

In the latest development, Neurocrine has said it will also conduct another three-month trial of the lower-dose, capsule formulations of the drug, putting back a resubmission of the data file to the summer of 2008.

And in addition to another clinical trial of the high dose, the FDA has also asked for a separate dose of the drug to be developed for use in the elderly. This prompted the company to focus on indiplon capsules and look at developing the tablet version only for a follow-up sleep maintenance indication at a later date.

Analysts said the update, given alongside the company’s third-quarter results in which it posted a loss $39 million compared to a profit of $26 million a year earlier, raised the risk profile of indiplon.

Approval of the drug is less certain now, and the delay also means that indiplon would launch into a market changed by the introduction of generic versions of Sanofi-Aventis’ top-selling insomnia drug Ambien (zolpidem) in the USA, which could occur in 2007.

Shares in Neurocrine lost a third of their value on Friday to close at $7.72, their lowest level for a year.