More than 30% of the US population suffers from insomnia, and the implications of this are far reaching. Statistics show that 100,000 vehicle accidents occur annually due to drowsy driving. An estimated 1,500 die each year in these collisions. Employers spend approximately $3,200 more in health care costs on employees with sleep problems than for those who sleep well. insomnia costs the US Government more than $15 billion per year in healthcare costs, and US industry loses about $150 billion each year because of sleep deprived workers.
It’s a major issue, and as these statistics show, it’s currently underserved.
People that suffer from insomnia have a number of options, some clinically validated, some not, but the standard of care in the space is prescription sleeping pills, such as eszopiclone (Lunesta), ramelteon (Rozerem), zaleplon (Sonata), and zolpidem (Ambien). These are effective in that they help a patient get to, and maintain, sleep, but they have some pretty serious side effects. Notably, they result in residual daytime sedation. This, in turn, contributes to many of the above mentioned statistics.
A number of companies are working on a solution – a pharmaceutical grade sleeping aid that helps patients sleep, but doesn’t make them tired the following day. For a company that is successful to this aim, there’s a large market waiting to be served. These companies are taking a variety of approaches, but one of the most promising is that of New York-based Blake Insomnia Therapeutics Inc (OTCMKTS:BKIT).
The company was born out of a patent pending compound called ZLX-1, which its now CEO Mr. Birger Jan Olsen invented. This compound, now branded as Zleepax, uses a beta blocker called Nebivolol as its primary ingredient, and the ingredient that helps to induce sleep. At first glance, this may seem counter intuitive. Beta blockers are traditionally associated with causing a lack of sleep and restlessness as a major side effect. That’s true, but there are a few generations of beta blockers, and it’s the first and second generations that create the unwanted side effects. They derive from the drugs’ impact on the body’s release of what’s called melatonin – a hormone that we produce naturally during sleep, but of which first and second generation beta blockers inhibit the release.
A 2007 study conducted in Israel hypothesized that a third generation beta blocker such as Nebivolol wouldn’t inhibit sleep in the same way that early generations do, because it doesn’t inhibit the release of melatonin. Further, that it’s vasodilative properties, combined with the standard mechanism of action of beta blockers (to reduce the impact of stress hormones on smooth muscle) might actually improve sleep.
The study compared Nebivolol to a second generation beta blocker called Atenolol, and the results supported the hypothesis. Using what’s called the Pittsburgh Sleep Quality Index (PSQI), an industry standard test of sleep quality, the study concluded that improve the sleep quality in terms of PSQI scores in relatively young hypertensive patients with mild hypertension, whereas Atenolol worsened it.
Olsen took this conclusion, and ran with it. He formulated Zleepax on the assumption that Nebivolol could reduce stress related sleep problems, and now aims to carry the drug through the clinical development pathway in the US and Europe.
What’s the Market Potential for This Sort of Asset?
The current insomnia market totals around $1.4 billion globally. This number is down on the $2.1 billion recorded in 2013, but analysts expect a recovery between now and 2023, with 2023 revenues expected to total $1.8 billion globally. The decline came as a result of generic erosion of some of the branded assets in the space, but the recovery will come on the back of two fresh assets – Belsomra, marketed by Merck & Co., Inc. (NYSE:MRK), and E-2006, marketed by Eisai Co., Ltd (ADR) (OTCMKTS:ESALY). Belsomra is expected to generate $617 million annually by 2023. The US market accounts for around 75% of global demand for pharmaceutical grade sleep aids.
Both Belsomra and E-2006, as well as a previous global bestseller, Lunesta, induce the residual daytime tiredness that Blake Insomnia Therapeutics is trying to overcome with Zleepax. The path to approval for these types of drugs is relatively long, but if Zleepax can successfully navigate through to regulatory approval in the US, and if it can pick up a label that states it removes the potential for residual tiredness, it could quickly start to eat away at the market share of the current leaders.
At its current market capitalization, Blake Insomnia Therapeutics would only need to capture a fraction of the current market and its revenues would outweigh its market value substantially.
What Are the Risks?
This may be a novel and seemingly revolutionary approach to the issues that currently exist in the market, but there is inherent risk in attempting to redefine a pharmaceutical asset class, and Blake Insomnia Therapeutics is not immune to these risks. The primary risk is funding. Trials are expensive, and Blake Insomnia Therapeutics will need to attract funding if it is going to get Zleepax into the clinic. Another risk is rooted in the drug’s clinical efficacy and safety. Many drugs demonstrate promising results before they hit the clinic (as did this one in the above discussed study), but then this fails to translate to the sponsored studies.
All said, this is an early stage biotech with all the associated risks of investing at this end of the space, but it has a patent pending asset that could disrupt a billion-dollar industry. If Blake Insomnia Therapeutics can avoid the pitfalls of the clinical development pathway, it could be worth many multiples of its current market capitalization.
The author currently has no position in the companies mentioned within the article.
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written by: Samuel Rae