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Transcept Pharmaceuticals Rises on Potential Sleeping Pill Approval


After a US rejection of Intermezzo in July, the company expects to get word of possible clearance by next month. If approved, the drug may hit the market by early 2012.

The outlook for approval of Transcept Pharmaceuticals' (TSPT) sleeping pill looked pretty bleak just three months ago. But in a surprising turn of events, the drug, Intermezzo, may be on the market by early next year.

Shares of Transcept are up 28% to $7.71 in morning trading Tuesday after the company said the US Food and Drug Administration will decide by November 27 whether the pill gets approved for sale. Transcept was among a cluster of companies last week to submit applications for US approval. (See Onyx, Chelsea Therapeutics, Horizon Pharma, Transcept Pharmacueticals File for Drug Approvals in US.) The shares are still down 7% this year.

Transcept is taking another run at approval after the FDA rejected the company's application in July because of safety concerns about the drug. (See Transcept Tanks on Drug Rejection.)

Intermezzo helps people who wake up in the middle of the night and have trouble going back to sleep. The drug also was rejected in 2009 due to safety concerns. The FDA felt that the drug poses a risk to people who take the pill only a few hours before they have to wake. Transcept has been working toward meeting those concerns.

Intermezzo's active ingredient is zolpidem, the drug also used in Ambien and generic versions of that insomnia pill. Intermezzo has a lower dose of zolpidem. The proposed use of middle of the night sleeping aid is new for the drug.

If approved, the company could bring Intermezzo to the market by early 2012, Zacks Investment Research analyst Jason Napodano says.

Napodano predicts the drug could reach peak annual sales of $200 million to $300 million. He has hold rating on the stock with a price target of $8 a share.

Another positive for the company: FDA approval would trigger a $10 million milestone payment from development partner Purdue Pharmaceutical Products. Closely held Purdue licensed the drug for sales in the US. Transcept would get royalties from those sales. Purdue has the right to negotiate for sales in Canada and Mexico and Transcept has sought partners for sales overseas, according to securities filings.

Twitter: @brettchase
No positions in stocks mentioned.
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