Neurocrine Biosciences saw its shares plunge 62% to close at $20.56 yesterday, as investors reeled on the surprising news that US regulators stopped short of issuing a green light for the group’s insomnia drug Indiplon.

The company said it received an “approvable” letter from the US Food and Drug Administration for the 5mg and 10mg capsule versions of the drug, but it did not disclose what the agency requires for full clearance to be considered. The 15mg extended-release pills were turned down outright.

“While we are disappointed in the FDA action, we will move forward expeditiously to address FDA’s outstanding questions regarding the applications,” remarked Gary Lyons, Neurocrine’s president and chief executive.

Indiplon, which is widely expected to become a blockbuster if it makes it to market, belongs to the same class of drugs as Sanofi-Aventis’ key player Ambien (zolpidem), and poses a significant threat to Sepracor’s more recent offering Lunesta (eszopiclone).

But sales of these medicines have taken a hit over the last few months, after reports in the US of alleged sleep-walking and sleep-binge eating put potential users off.

Shares in drug giant Pfizer, which holds certain marketing rights to Indiplon, stayed relatively flat after the news, but Sepracor basked in the drug’s misfortune, its stock climbing 14% to close at $44.82.