Under Generic Pressure, San Diego’s Somaxon Looks for New Options

Business hasn’t gotten any easier over the past six months for San Diego’s Somaxon Pharmaceuticals (NASDAQ: [[ticker:SOMX]]), which says it has hired the investment banking firm Stifel Nicolaus Weisel to help the company assess its strategic options. The company also laid off 60 percent of its employees who aren’t out in the field.

The company has struggled to establish itself against lower-cost generics in the sleeping pill market. Somaxon began selling doxepin (Silenor), its prescription drug for insomnia in September 2010. In June, Somaxon filed patent infringement lawsuits against four generic drugmakers that are challenging its patents.

The banking firm was hired to help Somoxon identify alternative strategies, according to Somaxon CEO Richard Pascoe in a statement issued yesterday. That could include “one or more of a sale of the company or assets relating to Silenor, or partnering or other collaboration transactions relating to U.S. or ex-U.S. prescription or over-the-counter rights to Silenor,” Pascoe says.

While the company didn’t say yesterday how many employees were laid off, Somaxon reported in its third-quarter financial results that it had terminated 14 employees in November, after the quarter had ended.

Somaxon reported sales of just $3.7 million for the third quarter that ended Sept. 30, compared with sales of $38,000 in the same quarter last year, when Somaxon began Silenor sales. The company lost $17 million, or 36 cents a share, compared with $12.9 million, or 37 cents a share). Somaxon says it had $34 million in cash and cash equivalents at the end of September.

Somaxon says it intends to allocate significantly more marketing resources to direct-to-consumer marketing in 2012, concentrating in regions where there is a potential for sales growth based on managed care coverage, favorable insomnia demographics, feasible media costs, and in areas where the company has sales representatives. Somaxon says it plans to hire 30 sales reps by the end of the year.

Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.