Ebb & Flow

Speculators start your engines. Last week saw developments in the insomnia space that have analysts and investors pondering the futures of Sepracor (SEPR) and Neurocrine (NBIX).

SEPR started the week with a 9% pop on Monday following media reports that Pfizer (PFE) might have its eye on acquiring the company and in particular SEPR's Lunesta insomnia drug. Further fueling the fire were analyst notes that also threw Schering-Plough (SGP) into the mix as a potential suitor.

One buysider noted the absence of SEPR's top brass at the Goldman Sachs Twenty-Seventh Annual Global Healthcare Conference the week before last. The buysider, who asked not to be named, noted that SEPR's VP of IR, Jonae Barnes, did the presenting. "The CEOs of Pfizer, Lilly and Merck were there - where were the CEO or CFO of Sepracor?" the buysider asked. "It's just an observation, but maybe there was a reason for their absence."

The plot thickened on Thursday evening, when PFE ended its deal with NBIX to develop the biotech's indiplon insomnia compound. In May, NBIX received an approvable letter for indiplon immediate-release (IR) and a not approvable letter for indiplon XR. The company said last week that FDA may require additional safety data for the IR capsules and will likely require additional clinical data for the XR tablets.

Insomnia dreams

The big question, said Avik Roy of JPMorgan Private Equity, is "how much Pfizer wants to be in the insomnia market. If so, how much are they willing to pay for it."

PFE did not return calls seeking comment on its strategy for the insomnia space.

SEPR, which also didn't return calls, has been surging ever since NBIX received FDA's indiplon letters in May. SEPR hit a 52-week low of $42.29 on April 26, but closed Friday at $60.26, just shy of its 52-week high of $62.06.

At Friday's close, the company was valued at $6.6 billion. This year, analysts estimate the company to post revenues of $1.26 billion, and the Street expects that number to grow to $1.53 billion in 2007.

"Pfizer

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