[jyl]

FDA rejected the long-acting dose of their insomnia drug. The short-acting dose was approved.

Big shock. Investors thought drug would either be approved outright, or approvable (will approve after resolve some final issues). No one imagined FDA would answer NON-approvable. Clinical data showed efficacy and no safety issues.

Company said FDA letter indicated agency did not have enough time to review all data. This is hard to reconcile with a NON-approvable, but also makes no sense for management to misrepresent a letter that will be promptly examined by securities lawyers. So something weird has happened.

Under an optimistic scenario, they satisfy FDA concerns and get approval in several months or a year. By then more insomnia drugs are on the market and PFE (who will market the drug) may be less committed to it. Under a pessimistic scenario, the long-acting dose is dead, PFE won't market the drug, and hard to see the company's future.

Closed at $54 the day before. After the news was announced, the stock started trading pre-open at $30. Fell as people digested the news, was $25 by the time the market opened. Ended the day at $20. During the day, volume was roughly equal to the entire share count.

Remarkable. But not that remarkable for biotech, unfortunately.