TorreyPines Therapeutics: Down, But Not Out

First, a quick snapshot of TorreyPines (TPTX) financials reveals cash and equivalents of $39.7 million [M] at the end of 3Q07 with a market cap of just $40.6M based on intraday trading yesterday at $2.58/share. Revenue (ttm) stands at $9.9M, resulting in a net loss (ttm) of $24.8M. Total debt is $5.3M and insider ownership is high at 47% with 25% institutional owners, resulting in very low float of just 4.6 million shares out of 15.7 million shares of common stock outstanding and a low average trading volume of 20,000 shares/day.

In October 2007, the Company announced mixed results of its lead pain/migraine drug tezampanel given as a subcutaneous injection, which met the primary endpoint as a 40 mg dose in a 306 patient, Phase 2b clinical trial for the treatment of a single, acute migraine attack. However, two other doses studied, 70 mg and 100 mg failed to reach statistical significance on the primary endpoint. In this trial, tezampanel was well tolerated and there were no serious or medically important adverse events reported.

Most recently, the Company reported pharmacokinetic data obtained in a Phase 1 maximum tolerated dose clinical trial of NGX426, the oral prodrug of tezampanel, which demonstrated that the area under the curve [AUC], which represents the total amount of drug absorbed by the body, of a single, 80 mg, oral dose of NGX426 is comparable to the AUC of a single, 40 mg, subcutaneous dose of tezampanel. With the recently demonstrated efficacy of 40 mg of tezampanel in a Phase 2b clinical trial in acute migraine, the comparable AUCs suggest that NGX426 also may be effective in treating acute migraine headache. The Company plans to initiate a Phase 2a study of NGX426 in acute migraine in the 1H08.

My take is that the Company is a riskier bet given the mixed Phase 2b trial results, but could still prove to be a winner, especially if NGX426 proves to be an effective treatment n the upcoming Phase 2a trial and beyond, as it represents the most commercially viable form of tezampanel given its oral dosing formulation. The stock should find support around the $2.50 level, which is near its cash position and could still turn out to be a winner for speculative biotech investors given the huge potential market for its lead drug candidate in the treatment of migraines and pain. The Company also plans to meet with the FDA in the 2H08 for an end of Phase 2 meeting in preparation for Phase 3 trial initiation of lead drug candidate tezampanel as a subcuatneous injection. TorreyPines also has two Alzheimer's disease research collaboration agreements with Japan-based Eisai, who recently acquired MGI Pharma (MOGN) for $3.9 billion in cash.

Disclosure: none