Markets

Merck Sails Into Bermuda Triangle to Obtain Yet Another Sleeping Pill

By Jim Edwards

Updated on: July 7, 2011 / 10:25 AM EDT / MoneyWatch

The fact that Merck (MRK) has a new sleeping pill in late-stage development is a surprise: Merck should know better. Insomnia drugs are the Bermuda Triangle of the pharmaceutical business -- filled with lost dollars and expensive shipwrecks. Merck itself previously tried and failed to develop a sleeping pill, spiking the effort in 2007.

Merck's new pill has the chemical name suvorexant. The company believes it might be a winner because it's not a sedative. Instead it works by turning off the body's natural "wake-up" mechanism. The company believes it could nab a piece of the $2.7 billion insomnia market by offering a non-addictive pill that isn't subject to DEA monitoring the way Sanofi's (SNY) Ambien is.

On paper, it sounds great. History, however, suggests otherwise. Here's a list of recent market entries:

Drug, company, status
Ambien, Sanofi, (blockbuster gone generic)
Lunesta, Sunovion (blockbuster)
Silenor, Somaxon (not profitable)
indiplon, Pfizer (failed)
Rozerem, Takeda (not profitable)
almorexant, Actelion (failed)
gaboxadol Merck (failed)
multiple other generics (NA)
multiple over-the-counter "nighttime" medicines (NA)

The category is crowded with cheap generics -- a red flag for any company that must via the laws of economics ask patients to pay more for an equivalent product.

Worse, there are already two pills on the market that are also non-sedatives that claim to work with the body's natural sleep mechanism. Takeda's Rozerem is famously unprofitable and Somaxon (SOMX)'s Silenor made just $2.9 million in Q1 2011, despite being backed by the marketing arms of Procter & Gamble (PG) and the drug salesforce of Publicis (PUB).

Even if, like Sunovion and Lunesta, you can succeed, the price of that success is high. Sunovion spent hundreds of millions advertising Lunesta to get traction. At one time, Sunovion's Lunesta ad budget was the largest for a drug brand on Planet Earth even though it's a relatively small company.

Lunesta had big revenues before the Ambien went generic. Sunovion, which was acquired, no longer reports Lunesta sales, but the internal gossip suggests sales have sunk, eaten away by generic Ambien, which is much cheaper.

Pfizer (PFE) has tried and failed to bring a new sleeping pill to market. GlaxoSmithKline (GSK) burned $635 million on an identical venture. Merck axed its $270 million development pact with Lundbeck in 2007.

And the FDA is wary of drugs that don't address life-threatening illnesses if they also have side effects. Plus -- and this is a counterintuitive thought -- some insomniacs just want the lights to go out, and might actually favor the "drugged" sedative feeling that Merck is trying to avoid.

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Image by Flickr users yeowatzup and planetchopstick, CC.