The FDA has deemed 5mg. and 10 mg. doses of the Neurocrine Biosciences/Pfizer sleeping pill Indiplon “approvable” but did not grant approval to a 15 mg. extended-release version of the drug.

In a conference call with investors this morning, Neurocrine CEO Gary Lyons called the FDA decision “a surprise” and said his firm, and Indiplon co-marketer Pfizer, would work together to discuss the FDA’s concerns and resubmit an application for the drug as soon as possible.

A Pfizer spokesperson deferred comments on the Indiplon decision back to Neurocrine.Shares of Neurocrine plummeted 60% in afternoon trading following the news. Deutsche Bank large-caps pharmaceutical analyst Barbara Ryan told MM&M the decision means Indiplon, for all intents and purposes, has been “put to bed.”“We’ve taken it out of our estimates for Pfizer in totality and we are also speculating that Pfizer will likely terminate their agreement with Neurocrine.”

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Under the agreement, Neurocrine had stood to get a $109 million milestone payment from Pfizer upon approval. At press time it was unclear whether non-approval of the 15 mg. dose will impact the pact.Ryan said the FDA decision could be a boon for Sepracor’s Lunesta.“Obviously, Pfizer is a fierce competitor to be reckoned with and they won’t have to worry about that competition. You have generic Ambien coming into the market, which will be an issue but, as a new and heavily promoted drug, Lunesta will be in a much better position.”