Scrapping of insomnia drug jeopardizes Lundbeck facility’s future in King of Prussia

Today's announcement by Merck & Co. Inc. and Danish pharmaceutical company H. Lundbeck A/S that they were scrapping an insomnia drug because of disappointing effectiveness and side effects puts in jeopardy the future of Lundbeck's U.S. commercial headquarters in King of Prussia.

In February, Lundbeck USA moved into an 11,000-square-foot office in King of Prussia to establish a U.S. commercial presence and begin selling medicines, including eventually the experimental insomnia drug, gaboxadol.

Merck and Lundbeck, which collaborated for three years, said they were halting the third and final stage of studies because "the overall clinical profile" for gaboxadol "does not support further development." Side effects included dizziness, hallucinations, vomiting, and a rapid heartbeat, referred to as tachycardia.

In December, Merck had forecast that the insomnia drug could be important to future sales, but, in October, Merck delayed the expected regulatory filing date with the FDA to mid-2007 because of slower-than-expected enrollment in clinical trials.

Developed by Lundbeck, gaboxadol was touted as the first in a new class of compounds to treat insomnia and would have been the first product Lundbeck launched in the United States.

Lundbeck has no product sales of its own in the United States, although its antidepressant Lexapro is sold here in a partnership with Forest Laboratories Inc., of New York.

Patrick J. Cashman, president of Lundbeck's U.S. sales and marketing operation in King of Prussia, was on an airplane to Copenhagen today and could not be reached. In an interview in October, he said he expected to hire 50 to 75 employees in the Philadelphia area and eventually about 300 nationwide.

"There are some change of plans, of course," said Jacob Tolstrup, Lundbeck's investor-relations manager in New Jersey. Asked if Lundbeck would stay in King of Prussia, Tolstrup said, "at least for the short time being."

Caroline Broge, a Lundbeck spokeswoman in Copenhagen, said: "It has been a very disappointing day for us in Lundbeck. It is a setback. We had intended to set up our own sales force in the U.S. to market gaboxadol. This process . . . has now been halted. However, we are looking at other opportunities to establish a Lundbeck commercial organization in the U.S. And this will need evaluation, of course."

Broge said commercial opportunities could include licensing other medicines. As for Lundbeck's remaining in King of Prussia, "we are evaluating at the moment" whether to stay, she said. "I can't give you an answer. But we are looking at other opportunities to establish a commercial organization."

She said 10 to 12 Lundbeck employees worked in King of Prussia. "So the hiring process has not been executed," she added.

Lundbeck sells medicines to treat psychiatric and neurological disorders. It has operations in more than 50 countries and employs 5,000 worldwide.

Lundbeck reported 2006 revenue of 9.2 billion Danish kroner, or about $1.6 billion. It is the second-largest Danish pharmaceutical company, behind Novo Nordisk A/S, also of Copenhagen.

Lundbeck has a partnership outside the United States with Teva Pharmaceutical Industries Ltd. to sell the Parkinson's disease drug Azilect in more than 20 countries. Israel-based Teva's North American headquarters are in North Wales, near Philadelphia.

Lundbeck has a drug research and development operation in Paramus, N.J.

The Pennsylvania Department of Community and Economic Development offered Lundbeck grants and tax credits contingent on job creation.

Lundbeck, which was founded in 1915 and which went public in Denmark in 1999, has made everything from veterinary medications to slippers. It shifted its focus to pharmaceuticals, including Cipramil for depression - a drug that Danish journalists dubbed "the happy pill" in the 1980s, according to the company's Web site. Cipramil is an earlier version of Cipralex, sold in the United States as Lexapro.