Almorexant, the new sleep drug from Switzerland's Actelion, has attracted plenty of attention, but it faces a tough path to approval and market share — and leaves room for disappointment.

The biotech company, which has outperformed big pharmaceutical groups during the downturn, may be overly reliant on the experimental drug that still has several hurdles to overcome before reaching the market and may face sturdy competition. "We foresee relatively limited upside during 2009 from almorexant, but significant potential downside risk, particularly if the data raise safety concerns," said Jeffries analyst Peter Welford.

Almorexant is an orexin antagonist, designed to block receptors for brain chemicals that maintain wakefulness and regulate the sleep-wake cycle. It could help avoid the risk of abuse and dependency that other sleep medicines have.

The first late stage data on the drug is due later this year and are unlikely to provide enough clarity to diminish some investors' uncertainties, Jeffries' Welford believes.

But he thinks almorexant's novel properties — current data suggests it could restore a natural sleep pattern without any next day hangover effect seen with current medicines — could expand the global insomnia market.

"I don't think the full potential is reflected in Actelion's share price," said Andy Smith, fund manager at Axa Framlington Biotech, which holds about 105,000 pounds ($172,000) of Actelion stock. "At the end of the day, there are a lot of patients and as patients get older, there will be an increasingly larger market."