Neurocrine Wakes Up Indiplon

The future of Neurocrine Biosciences' (NASDAQ:NBIX) lead insomnia drug candidate, Indiplon, just got a little clearer. As you'll recall, back in May the Food and Drug Administration issued approvable letters for two low-dose versions of Indiplon, but issued a non-approvable letter for the long-lasting higher dose version of the drug. Unfortunately, it was the extended-release higher dose that everyone was predicting to compete against heavily marketed insomnia drugs like Lunesta from Sepracor (NASDAQ:SEPR).

Today Neurocrine said that the FDA would require an additional clinical trial for the two approvable lower doses of Indiplon. Based on this request for additional trials, the company hopes to resubmit an application for Indiplon "before the end of Q2 2007."

Based on Neurocrine's statements, I fully expect Indiplon to receive a class 2 six-month review from the FDA -- rather than the shorter two-month class 1 review -- because the new clinical trial data will accompany the drug's resubmission for approval. This pushes any possible Indiplon approval out until early 2008 at the soonest, assuming there are no other setbacks along the way. Unfortunately, the company did not give any timeline for the long-lasting 15 mg dose of Indiplon.

It's worth mentioning here that even with this extended timeline for Indiplon, investors shouldn't be so quick to assume that lower doses will have an easy path toward approval or reach a high level of sales. I think Neurocrine firing the company's sales force and Pfizer (NYSE:PFE) dropping out of the collaboration and marketing agreement are more telling signs of the drug's prospects in the next few years.

I'm definitely not trying to sound like a pessimist here. Neurocrine is barely trading for above cash value and the company does have other promising drugs in the pipeline, but biotech investors have a tendency to minimize risks of a drug gaining approval. Sometimes biotech investors have nobody but themselves to blame, but other times it can be management's fault; they tend to paint a rosy picture of their drug's prospects, and thus the drug's warts only reveal themselves under an FDA panel review or drug rejection.

For more Foolish perspectives on Neurocrine:

• The FDA Tries to Put Neurocrine to Sleep
• Neurocrine Biosciences: From Bad to Worse
• Neurocrine's Tale of Woe

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Fool contributor Brian Lawler welcomes your feedback. He does not own shares of any company mentioned in this article. The Motley Fool has a disclosure policy .