UPDATE 1-Two Sepracor drugs suffer setback, shares tumble

* Sepracor depression drug ineffective in mid-stage study

* FDA puts hold on pediatric studies of Lunesta

By Ransdell Pierson

NEW YORK, July 1 (Reuters) - U.S. biotechnology company Sepracor Inc SEPR.O on Wednesday suffered a double setback as its experimental depression drug failed a mid-stage study and U.S. regulators halted two pediatric studies of its blockbuster Lunesta insomnia pill, sending shares down 15 percent.

The biotechnology company said its experimental depression medicine, called SEP-225289, failed to reduce symptoms of depression following eight weeks of treatment in a Phase II study involving 514 patients.

Sepracor said the levels of the drug that reached the bloodstream were lower than expected and well below those seen in earlier trials. Moreover, side effects of the drug were inconsistent with those seen in the earlier studies, the company said.

"While we are clearly disappointed with the findings from the analysis of the preliminary study results, we are in the process of further analysis of the dose response and secondary endpoints to determine how or if we will take this novel mechanistic approach forward," Mark Corrigan, Sepracor's executive vice president of research and development said in a release.

The depression drug is a member of a fairly new class of medicines designed to maximize the presence in the brain of three messenger chemicals: serotonin, norepinephrine and dopamine. Standard medicines maximize only serotonin or serotonin and norepinephrine.

The other setback involved Lunesta, the company's top-selling medicine, with annual revenue of over $500 million.