On Thursday morning we spoke with Tonix Pharmaceuticals' (NASDAQ:TNXP) CFO Dr. Leland Gershell. Let's get an update on Tonix.
2014's Top Pick
We picked Tonix as our top stock pick for 2014, you may recall, and the pivotal trial data that we think will send the stock much higher is approaching. On May 12, Tonix announced that it completed enrollment in the TNX-102 SL BESTFIT trial for fibromyalgia.
FM is a debilitating disease that lacks good treatments. FM patients do not get adequate restorative sleep, even if they sleep all night, and have associated body-wide pain, tenderness, depression, anxiety, forgetfulness, decreased alertness, and fatigue. This is similar to what happens to every person that does not get adequate restorative sleep.
FM takes over patients' lives, and FM patients are high-treatment seekers as a result. Most FM patients are on 2-4 drugs and still seeking relief.
Most FM patients (64%) try the muscle relaxer cyclobenzaprine to improve sleep quality, and most (58%) find it helpful. The problem, however, is that CBP taken orally comes on and wears off much too slowly.
There is a first pass mechanism in the liver that delays the oral form of CBP from becoming active for 2-3 hours, and also makes it last too long. This results in next day grogginess, from a medicine that was supposed to treat next day grogginess, amongst other things.
That was the impetus for creating TNX-102 SL, a very low dose of cyclobenzaprine delivered sublingually, so that it takes effect almost right away and can peak and wear off in time for a restorative night's sleep.
We believe that TNX-102 SL will be the first-line treatment for FM, and make Tonix a very valuable company. How valuable?
A Billion-Dollar Company
The other treatments for FM do a poor job and have side effects - best selling Cymbalta is just as likely to harm as help. Yet sales in FM for the approved drugs Cymbalta and Lyrica are about half a billion a year in the US ($560M and $450M in 2011). They are both also on pace to hit $1 billion in sales by 2020. They are coming off patent so they will not hit that number, but FM only had its first drug approved in 2007, after centuries of disease denial by the medical community. There is a lot of growth built in to the FM market.
Biotech companies generally trade at a multiple of sales. For example, AstraZeneca (NYSE:AZN) has a pretty low multiple and trades at less than 4 times annual sales, while Celgene (NASDAQ:CELG) has a pretty high multiple and trades for nearly 10 times annual sales.
Even if TNX-102 SL only equals the sub-par competition, it would eclipse a billion dollars in annual FM sales in the US. That makes Tonix a multi-billion dollar company, with a price per share in the hundreds.
So why is the share price so low now?
The only double-blind, placebo-controlled, multi-site clinical trial that Tonix has completed was a phase 2a trial with oral CBP.
Now, with the upcoming announcement of the BESTFIT data, we will see if the sublingual formulation predicts that billion dollar sales path.
The trial with oral CBP was meant to be a proof of concept study, but it actually showed statistical significance in pain reduction even in a sample one-fifth the size of BESTFIT.
That is what TNX-102 SL needs to do as well for approval from the FDA - it needs to show statistical significance in pain reduction in two trials (BESTFIT followed by a virtually identical trial).
Will the BESTFIT trial be a success? We are convinced the answer is yes for three main reasons:
- Safety: sublingual delivery of CBP is more effective than oral delivery, so a lower dose needs to be used, and a lower dose of a drug is generally considered a safety benefit. Even if that were not the case, CBP has been approved (not for FM) and on the market for decades in doses more than ten times that of TNX-102 SL, and has an excellent safety profile. Safety is usually a major concern in clinical trials, but there is almost no chance that there will be some unforeseen safety issue with this very low dose of a very well known drug.
- Longer duration: BESTFIT is 4 weeks longer than the phase 2a trial was. The extra time of restorative sleep should continue to help improve FM patients' symptoms. As we will see, this could also be important for TNX-102 SL's label.
- Larger sample: BESTFIT is powered with a large sample of patients to show statistically significant results if there is in fact a signal in the data. The 2a trial had only 18 patients in each arm, but the signal was still strong enough to show statistically significant improvement in three of five symptoms measured - pain, tenderness, and HAD (Hospital Anxiety and Depression) Depression. The 2a trial's signal was strong, now with a sample more than five times larger, and with the more effective delivery and longer trial duration, results should be even better in the BESTFIT trial.
For approval, TNX-102 SL needs to show statistically significant improvement in pain in 2 trials designed like BESTFIT, with no need for Tonix to meet with the FDA before application submission.
With success in BESTFIT, Tonix will run the final 12-week trial which should be nearly identical to BESTFIT, but could also contain small tweaks to build on the results of BESTFIT.
We saw that the 2a trial showed statistically significant improvement in tenderness and depression in addition to pain, and while this will have no impact on approval, it could mean more favorable language on TNX-102 SL's label.
Tonix announced complete enrollment in BESTFIT on May 12. 12 weeks later is August 4. The trial data is being managed by contract research organization Premier Research International. After the trial is complete, Premiere will take 6-8 weeks to compile and deliver the unblinded data. Eight weeks from August 4 is Sept 29, a couple days before the fourth quarter begins, and Tonix management has said several times they will release the top line data in "early" Q4.
Dr. Gershell gave us some color on this. Tonix will issue a press release and hold a conference call to discuss the data, no matter what the case.
If the data is good, Tonix will also likely submit a proposal to present the full results at the annual meeting of the American College of Rheumatology in mid-November in Boston.
By that time we expect Tonix to trade at or near our post-BESTFIT price target of $61.53. We should find out top line results in about 104 days or so. The countdown is on.
Disclosure: The author is long TNXP. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.