Merck & Co and Lundbeck are abandoning development of their experimental insomnia drug gaboxadol, a move which sent the Danish drugmaker’s shares into freefall.

The firms said they are discontinuing studies of the because data from recently-completed Phase III studies suggest that the overall clinical profile for gaboxadol in insomnia does not support further development.

As a result of this new information, Merck and Lundbeck added that they will not file gaboxadol with the US Food and Drug Administration, or any other regulatory agencies worldwide, and are terminating the project.

Specifically why the data from this “new information” meant the end for the studies was made more apparent by the companies but Joseph Tooley, an analyst with AG Edwards shed some light on the issue in a research note, saying that "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." Although earlier trials showed effectiveness in sleep onset and maintenance, the drug failed to do either in the latest trials, Mr Tooley wrote, noting that a recent sleep lab study failed to show sufficient effects at lower doses.

The abrupt termination of the project has come as a bit of a shock, especially as last December Merck listed the treatment as one of three for which it intended to file a New Drug Application for in 2007. Early clinical trials of gaboxadol, a first-in-class selective extrasynaptic GABA(A) receptor agonist, showed the most common side effects were nausea and dizziness, as well as headache, vomiting and tachycardia but last June, the companies reported that there were no serious adverse events in Phase II clinical trials of gaboxadol and that no patients withdrew from the studies due to side effects. No consistent next-day residual effects, such as the hangover-like ailments associated with some insomnia drugs on the market, were recorded in those studies.

Head of research at Merck, Peter Kim described the ending of the studies as “clearly disappointing," and although gaboxadol has gone by the wayside, he said “his firm remains “committed to our neuroscience and sleep disorders research programme, one of nine priority disease areas for research and product development. As part of that commitment, we also welcome the opportunity to engage in other joint development efforts with Lundbeck in the future."

Lundbeck reliance on Lexapro will continue

The effect of the decision on Merck’s stock was limited as it has other recently-launched products that will drive revenue growth, not least the once-daily diabetes treatment Januvia (sitagliptin), but it was a different matter for Lundbeck. Its shares sank 16.6% to close at 133 kroner on the Copenhagen Stock Exchange as investors rue the loss of gaboxadol, which many hoped would reduce the firm’s reliance on the antidepressant Cipralex/Lexapro (escitalopram oxalate), which accounted for almost two-thirds of sales last year and is facing US patent expiry in 2012.

Anders Gersel Pedersen, head of development at Lundbeck, was philosophical about the project, saying that “when developing new and innovative medicines there are always risks of failure, particularly for broad-based therapeutics which often carry a higher threshold for demonstrating value." He also said it is clearly disappointing, but the firm will continue to develop innovative medicines to treat unmet medical needs “and to seek strong and productive partnerships like the one we have experienced with Merck to maximise these efforts."