Online Extra: A Cephalon Vet Takes On Insomnia

Jack Lief helped create Provigil, the elixir of wakefulness. But his startup is committed to helping people sleep

If anyone understands both the challenges and potential rewards of messing with the brain, it's Jack Lief. The 60-year-old entrepreneur was one of the first employees at Cephalon Inc. (CEPH ). As head of development, he started the wakefulness drug Provigil on its path to FDA approval. Now, as chief executive officer of San Diego-based Arena Pharmaceuticals Inc. (ARNA ), Lief is going after the flip side of wakefulness—testing a treatment to promote sleep. The drug prolongs the deepest phase of slumber, during which the body releases growth hormone and other proteins that make people feel refreshed in the morning. Investors have woken up to Arena, pushing its shares up 191%, to $15.60, in the past year. Arena far outran the NASDAQ Biotechnology Index, which returned 19.5% in the same time period.

Arena's niche in the $2 billion sleep market could be lucrative. The San Diego company's compound blocks the activity of the wake-promoting protein seratonin by targeting a receptor in the brain called 5-HT2A. The company is positioning its drug to treat patients who fall asleep easily but wake up frequently during the night. According to the National Sleep Foundation, 56% of the 50 million insomniacs in the U.S. fall into that category.

Arena will have to clear some tough regulatory hurdles before it can reach out to the hordes of the sleep-deprived, however. The drug, which should enter midstage trials this year, affects the brain through a different pathway from that of Ambien or any other sleep drug on the market. Couple that newness with the FDA's increasing concerns about the safety of so-called lifestyle drugs, and Arena could be in for a long, expensive process. "The FDA is being very, very careful in its comments to us" about plans for clinical trials, Lief says. "That extra vigilance will increase the costs of the trials."

In the meantime, Arena is hedging its bets on sleep by developing drugs that target different 5HT receptors. It is preparing to start late-stage testing of a weight-loss drug that stimulates seratonin, making it similar to Phen-Fen, the Wyeth [WYE ] product that was pulled from the market when some patients developed heart trouble. By targeting seratonin more selectively than Phen-Fen did, Arena's drug appears to sidestep the cardiac risks.

On the sleep front, Lief finds himself facing the same challenge he and Cephalon CEO Frank R. Baldino Jr. confronted more than a decade ago. It may not be easy to persuade an increasingly cautious fda that altering the brain's natural cycles of consciousness and unconsciousness is a worthy pursuit. In terms of the drug-development hurdles they present, states of sleeping and waking actually "are comparable," says Lief, who was with Baldino when he first discovered the wakeful effects of the drug that became Provigil. "I must show that my drug is effective and extremely safe."

By Arlene Weintraub

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