Somaxon Pharmaceuticals
Based: San Diego, CA
Founded: 2003
www.somaxon.com 

Bottom line: Hanging in

What we said: In just two years, Somaxon has pushed a lead compound into Phase III and has two others coming up the pipeline behind it. It's helped that Somaxon started with a compound (doxepin) that had been approved 35 years ago as an antidepressant. A psychiatrist--Dr. Neil Kavey at Columbia-Presbyterian Medical Center--noticed that patients taking small doses of doxepin were reporting that they were sleeping through the night. That discovery has helped make Somaxon a contender among the drug developers scrambling to develop new and better sleep drugs in what is projected to be a massive market. Their goal: Show that Silenor can maintain sleep through the night without any of the side effects common to the class. Having a compound with an already well-defined safety profile has made their task much simpler. And their racing form helped attract a whopping $65 million third round just days before starting a pivotal trial for Silenor.

What happened: Somaxon Pharmaceuticals' eggs were primarily in one basket: the insomnia drug Silenor (doxepin). Once considered a leader in the race to develop a new insomnia drug, the developer had even lined up $65 million in financing to start marketing the drug and was in partnership talks. But when the FDA declined to hand it an approval earlier this year, the sudden rejection forced the developer to take out the budget axe and whack away. Somaxon slashed its payroll to a skeletal seven as it road out a rejection during one of the biggest cash crunches in industry history. But the company resubmitted its NDA and had a heart-to-heart with investors, successfully raising $6 million in a tough market in July. CEO Richard W. Pasco said at the time that the money would get them through the second quarter 2010. And in September Somaxon terminated its licensing deal to develop oral Nalmefene hydrochloride for impulse control disorders and substance abuse disorders. Under the terms of the pact, Biotie agreed to pay Somaxon $1 million.