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By Jason Napodano, CFA

The purpose of this article is to introduce investors to Tonix Pharmaceuticals (NASDAQ:TNXP) and the company's very low dose sublingual formulation of cyclobenzaprine for the treatment of fibromyalgia. We will start off with an introduction to fibromyalgia and existing treatment options, a brief history of cyclobenzaprine and how we believe it could be an effective treatment option for the disease, and then conclude with an overview of Tonix's development plans and clinical data to date.

What is Fibromyalgia?

Fibromyalgia Syndrome ("FM") is a complex medical disorder characterized by widespread musculoskeletal pain, fatigue, lack of sleep, and mood and memory issues. The pain associated with FM is often described as a constant dull ache or burning sensation, typically arising from the muscles along the back, neck and shoulders. FM tender points are identified by applying pressure to specific areas of the body, including the back of the head, between the shoulders, along the neck, the upper chest, the hips, and the knees.

The FM diagnostic criteria, established by the American College of Rheumatology (ACR) in 1990, includes a history of widespread pain in all four quadrants of the body for a minimum duration of three months, and pain in at least 11 of the 18 designated tender points when a specified amount of pressure is applied (Figure 1).

Besides the dull aching pain and fatigue, patients with FM often also experience mood and psychological disorders such as anxiety and depression. Many people who have fibromyalgia also have tension headaches and temporomandibular joint disorders. The symptoms are often worse in cold or damp weather.

People with FM tend to wake up with body aches and stiffness. For some patients, pain improves during the day and gets worse at night. However, fatigue and sleep problems are common in almost all patients. The National Pain Foundation estimates that nearly 90% of all FM patients have sleep problems. Patients with FM often report waking up tired, even after sleeping a long period of time. Others report frequent awakenings due to pain, sleep apnea, and restless leg syndrome in the middle of the night. Almost all FM patients report memory and concentration problems associated with the lack of sleep and distracting pain.

These sleep and concentration problems, referred to as "fibro-fog," severely affect many FM patients to the point where employment is difficult to obtain and/or maintain. Approximately 20% of FM patients file some form of disability claim. Approximately 70% of FM patients report difficulty in conducting normal daily tasks, such as light housework. Chronic fatigue syndrome ("CFS") has similar characteristics to FM, and patients are often diagnosed as having both FM and CFS.

...Causes...

The causes of FM are largely idiopathic, but common comorbid conditions include hypothyroidism, Lyme disease, endometriosis and irritable bowel syndrome. Physical trauma, surgery, infection, and psychological stress may bring about the onset of FM. In fact, stress is thought to play a significant role in the development of FM. There is a high correlation (approximately 42%) between the development of FM and post-traumatic stress disorder (PTSD).

Medical & Psychiatric Comorbidity:(click to enlarge)

There is evidence that genetic factors may also play a role in the development of FM. Research has demonstrated that FM is potentially associated with polymorphisms of genes in the serotoninergic, dopaminergic and catecholaminergic systems. Many researchers and physicians believe that dopamine dysfunction is centrally responsible for the symptoms associated with FM. Others believe that decreased serotonin levels are involved in the pathophysiology of FM.

Increasing attention is being devoted to irregularities of the central nervous system as the underlying mechanism of FM. Patients with FM commonly have elevated corticotrophin releasing hormone (CRH) and elevated Substance P in the cerebrospinal fluid, and increased activated mast cells and chemokines (MCP-1 and IL-8) in the blood.

...Epidemiology...

The National Institutes of Health (NIH) estimates that FM affects approximately 5 million adult Americans, or roughly 2% of the general population. The American Fibromyalgia Syndrome Association (AFSA) pegs the prevalence higher, at approximately 3 to 5% of the general population. These statistics are in agreement with the National Fibromyalgia Association (NFA), which estimates approximately 10 million Americans with FM.

Diagnosis is usually made between the ages of 20 to 50 years, but the incidence of FM rises with age. In fact, by age 80, approximately 8% of adults meet the ACR classification of FM. Diagnosis is often done by a rheumatologist (~42% of the time) or general practitioner (~35% of the time).

Women outnumber men diagnosed with FM by 9 to 1. Many female FM patients report flare-ups associated with their menstrual cycle. As noted above, there is a high correlation of FM and endometriosis. FM is often seen in families, among siblings or mothers and their children as well. Risk in developing FM increased by 8.5x if a first-degree family member has been diagnosed with FM.

…Treatment Options…

FM is a relatively new diagnosis. Prior to the 1990s, it was often incorrectly diagnosed as osteoarthritis or chronic fatigue syndrome. In fact, a survey conducted by Russell K. Portenoy, MD, Chairman and Gerald J. Friedman Chair in Pain Medicine and Palliative Care at the Departments of Pain Medicine and Palliative Care, Beth Israel Medical Center, New York, NY, in 2007 found that 46% of newly diagnosed FM patients (n=2,596) consulted between 3 and 6 physicians before being finally being diagnosed with FM.

There is no cure for FM. Treatment typically consists of symptom management. Beside cognitive behavioral therapy and physical therapy, data suggests that FM patients are high pharmacological treatment seekers. Over 50% of FM patients visit their treatment physician over five times a year. Nearly three-fourths spend between $100 and $500 per month on OTC medications and nearly two-thirds spend the same amount on prescription medications.

FM is a highly complex disease, with manifestation of pain, mood and psychological disorders, and sleep disturbances. The NFA notes healthcare practitioners should "[e]stablish a multifaceted and individualized approach…" for each specific patient depending on the severity of the symptoms in pain, mood, and sleep. There is no universally accepted standard-of-care. As such, multi-pharmacology is the norm for treating patients with FM

Lyrica: There were no FDA-approved medications for FM until 2007 when the U.S. FDA approved Pfizer's Lyrica (pregabalin). Lyrica is a second-generation alpha-2-delta ligand calcium channel blocker that decreases the release of neurotransmitters including glutamate, noradrenaline, substance P and calcitonin gene-related peptide. Pfizer designed the drug as a more potent successor to gabapentin. The approval of Lyrica was a major step forward for the treatment of FM associated pain. The drug replaced the use of off-label analgesics, including gabapentin, but does little to address the mood or sleep-related issues associated with FM.

Pfizer (NYSE:PFE) sold $3.7 billion worth of Lyrica worldwide in 2011. U.S. sales of Lyrica totaled $1.5 billion. FDA approvals include neuropathic pain and fibromyalgia. We estimate that around 1/3rd of Lyrica prescriptions, or around 3.2 million prescriptions annually in the U.S., accounting for roughly $500 million in sales, are in FM.

Cymbalta & Savella: In 2008, the U.S. FDA approved Eli Lilly's Cymbalta (duloxetine), a serotonin-norepinephrine reuptake inhibitor (SNRI) for the treatment of FM. Cymbalta is a highly effective molecule for addressing both pain and the mood / psychological disorders associated with FM. The drug has only a modest benefit on improvement in quality (restorative) sleep. Still, however, the approval of Cymbalta facilitated the replacement of older generation and off-label use of anti-depressants for the treatment of FM.

Lilly (NYSE:LLY) sold $4.2 billion worth of Cymbalta worldwide in 2011. U.S. sales of Cymbalta totaled $3.2 billion. FDA approvals include major depressive disorder, diabetic peripheral neuropathic pain, general anxiety disorder, and fibromyalgia and chronic musculoskeletal pain. We estimate that around 1/5th of U.S. Cymbalta sales, or around 3.5 million tablets annually in the U.S. accounting for roughly $550 million in sales, are in FM. In 2009, the U.S. FDA approved Forest Lab's (NYSE:FRX) Savella (milnacipran), a serotonin-norepinephrine reuptake inhibitor (SNRI) for the treatment of FM. Savella is only indicated for the treatment of FM. Sales were approximately $100 million in 2011. SNRI molecules carry significant side-effect risks, including nausea, headache, constipation, dizziness, insomnia, hypertension, increased heart rate and palpitations, loss of appetite, vision changes, mood swings, restlessness, sedation, sexual dysfunction, and suicidal thoughts.

Opioids & Tramadol: Opioid use is common for the treatment of severe pain. In fact, almost 40% of all FM patients will try opioids as a treatment option for managing the pain associated with FM. However, opioids carry significant side effects and addiction risk, so they should be used with caution. Opioids may also worsen mood (increase depression) and have little to no effectiveness in restorative sleep.

Tramadol is a centrally acting analgesic with atypical opioid and anti-depressant-like activity. The drug is moderately effective in treating FM pain. Effects on mood and restorative sleep are less predictable. Side effects included constipation, drowsiness, nausea, headache, and dizziness. In addition, long-term use of tramadol may be associated with physical dependence and withdrawal syndrome.

Naltrexone, an opioid antagonist, has been found to be effective at very low dosage in reducing fibromyalgia symptoms in a small controlled trial. Naltrexone also acts at very low dosage to inhibit microglia cells thereby reducing pro-inflammatory cytokines and neurotoxic superoxides.

Besides the above approved treatment options, many physicians and patients seek off-label medications to augment Lyrica and Cymbalta to create a more complete treatment regimen for FM. Dopamine agonists such as Mirapex (pramipexole) and ReQuip (ropinirole) have been shown to result in some improvement in a minority of patients, but numerous side effects, including the onset of impulse control disorders have led to limited use. Muscle relaxants such as cyclobenzaprine are wildly used for the treatment of muscle spasms and acute musculoskeletal pain. We discuss cyclobenzaprine in greater detail below.

With the approvals of Lyrica, Cymbalta, and Savella, use of off-label or experimental medications for the treatment of FM is declining. Frost & Sullivan conducted a market study on behalf of Tonix Pharmaceuticals that concluded the total prescription market for FM was approximately $1.2 billion in 2010. Frost & Sullivan concluded that the market has grown at a compound annual growth rate of 18% since 2007. Decision Resources estimates that approximately $1.1 billion of the $1.3 billion market in 2011 was on-label sales of Lyrica (~$450M), Cymbalta (~$550M), and Savella (~$100M), with the other $0.2 billion coming from off-label use of drugs like Tramadol, naltrexone, and cyclobenzaprine. We note that dollar sales of off-label cyclobenzaprine is muted by the low cost of the generic molecules. In actual prescription numbers, Tonix management estimates that cyclobenzaprine is third most commonly prescribed drug for FM.

…Limitations Of Existing Treatments…

Despite the fact that the FM market is generating $1.2+ billion in prescription sales, headlined by blockbuster drugs such as Lyrica and Cymbalta, we see a significant void for one of the main manifestations of the disease - sleep disturbance. No one molecule targets all three areas of the disease (Figure 2). As noted above, The National Pain Foundation estimates that 90% of all FM patients have sleep problems. Unfortunately, drugs indicated specifically for insomnia, such as Ambien (zolpidem) and Lunesta (eszopiclone), seem to do little to reduce the chronic fatigue and lethargy associated with FM. For most FM patients, it's not a lack of sleep; it's a lack of quality restorative sleep.

The combination of pain and sleep disturbance is a double-edged sword: the pain makes sleep more difficult and sleep deprivation exacerbates pain. In fact, data shows that a reduction in sleep disturbance is usually followed by improvement in pain symptoms. This also highlights the importance of healthy sleep and access to sleep specialists in treating the disease.

Figure 2

Accordingly, we see a meaningful opportunity for a new medication that targets this unmet area. Polypharmacy is already common in the treatment of FM, as is experience with cyclobenzaprine.

Cyclobenzaprine

Cyclobenzaprine is a muscle relaxant medication used to relieve skeletal muscle spasms and associated pain in acute musculoskeletal conditions. The drug was first synthesized by scientists at Merck (NYSE:MRK) in 1961. Merck received U.S. approval for 10 mg immediate-release formulation, called Flexeril, in 1977. It is also commonly used off-label for the treatment of fibromyalgia. In fact, there have been a number of well-controlled clinical studies addressing the potential use and benefit of cyclobenzaprine in treatment symptoms of FM; however, to management's knowledge, Tonix is the only company pursuing U.S. FDA approval of a cyclobenzaprine product for fibromyalgia.

In the 1990s, Merck conducted studies to support an application to market a low dose (5 mg) Flexeril tablet for the over-the-counter (OTC) market. Although Merck's studies re-affirmed the safety and efficacy of cyclobenzaprine in several large clinical trials, the OTC division of the FDA rejected the application for use without a prescription, most likely because muscle spasm was deemed a condition that required a physician to diagnose and supervise the cyclobenzaprine (or other) treatment.

Merck divested the Flexeril franchise to Alza Pharmaceuticals. Alza subsequently was acquired by Johnson & Johnson (NYSE:JNJ). Based largely on the Merck studies, J&J won approval of Flexeril 5 mg tablets as a prescription medicine to treat muscle spasm. J&J promoted Flexeril 5 mg tablets briefly under Hatch-Waxman. There are now several generics providers of immediate release cyclobenzaprine at 10 mg. Doses below 10mg, such as the 5 mg tablet, are available but not in particularly high demand.

Cephalon acquired the rights to a 15 and 30 mg controlled-release cyclobenzaprine product, Amrix, in 2007 from ECR Pharmaceuticals. It is now also available as a generic. We think this is important to note because applications for approval of new formulations of older generic drugs sometimes get held up at the FDA because the safety or efficacy data in the monograph are out of date. The FDA will use the 505(2)(B) application as an opportunity to update the efficacy dossier (Cipher Pharmaceuticals took three attempts to gain approval for a generic reformulation of isotretinoin) or enhance the safety database (Transcept Pharmaceuticals took three attempts to gain approval for a low-dose zolpidem).

We believe the FDA's files on cyclobenzaprine are relatively fresh thanks to the work done by Merck and ECR Pharma over the past decade. The drug is not a controlled substance and is widely known among physicians that treat FM. Prescription tracking services note over 223 million prescriptions written in 2010.

…Market Research In FM…

In 1991, the Department of Psychiatry at Toronto Hospital in Ontario, Canada published a paper in the Journal of Rheumatology (1991,18(3):452-4) entitled, "The effects of cyclobenzaprine on sleep physiology and symptoms in patients with fibromyalgia." The paper highlighted a double blind, placebo controlled, crossover design study examining overnight sleep physiology, pain, fatigue, and mood symptoms in 12 patients with fibromyalgia treated with cyclobenzaprine. Nine patients completed the study. Patients receiving cyclobenzaprine showed a decrease in evening fatigue (F = 4.7, p<0.05) and an increase in total sleep time (F = 4.4, p<0.05). Pain, including tender point count and dolorimetry, mood ratings, and alpha non-REM EEG sleep anomaly were unchanged by cyclobenzaprine.

Despite the fact that cyclobenzaprine did little to improve pain or mood scores, the effects on sleep physiology were intriguing. In 1993, the Rheumatology Unit at L. Sacco Hospital in Milan, Italy published a paper in the Journal of International Medical Research (1993,21(2):74-80) entitled, "A double-blind crossover study of two cyclobenzaprine regimens in primary fibromyalgia syndrome." In the study, the efficacy and tolerability of oral cyclobenzaprine were compared in 40 patients affected by primary fibromyalgia syndrome. The patients were randomly divided into two groups, each treated for 15 days with either a single dose of 10 mg/day cyclobenzaprine at bedtime or 30 mg/day cyclobenzaprine in three equal doses daily. Both regimens resulted in a significant decline in the number of tender points; significant improvements were also reported in the quality of sleep, anxiety, fatigue, irritable bowel syndrome and stiffness.

Results show there was no significant difference in efficacy between the two therapeutic regimens at any stage during the trial - i.e. higher doses of cyclobenzaprine were no more effective than lower doses. However, the frequency of reported side-effects was significantly greater (p<0.001) when patients received 30 mg/day cyclobenzaprine (26 patients, 84%) than when they received 10 mg/day (10 patients, 27%). Therefore, the authors concluded that a dose of 10 mg cyclobenzaprine at bedtime significantly improved the symptomatology of patients affected by primary fibromyalgia syndrome, and that the higher dose did not further reduce these symptoms but did result in a higher incidence of side-effects.

In February 2004, researchers from the Walter Reed Army Medical Center, Washington, DC and Uniformed Services University of the Health Sciences, Bethesda, MD, published a meta-analysis of previous studies conducted with cyclobenzaprine for the treatment of FM in the Journal of Arthritis & Rheumatism (Vol.51, No.1,9-13), and later presented at the American College of Rheumatology. For the paper, the authors looked at five randomized, controlled trials that included a total of 312 patients (95% were women). The studies generally included a once-daily dose of cyclobenzaprine or placebo. Dosages were generally started at 10 mg at bedtime and titrated as tolerated. If participants found the medication to be too sedating, the dosage (placebo or cyclobenzaprine) was changed to the previous dosage, with a minimum of 10 mg cyclobenzaprine or "equivalent" placebo.

Abstracted outcomes included global improvement and treatment effects on pain, fatigue, sleep, and tender points (number and/or severity). Treatment effects were extracted as continuous variables at 3 time points (4, 8, and 12 weeks). Overall, patients treated with cyclobenzaprine were more likely to report themselves to be "improved" (odds ratio [OR] 3.0, 95% confidence interval [95% CI] 1.6 -5.6) than those treated with placebo. A statistically significant improvement in sleep was noted for all time points with a standardized mean difference ranging from 0.34 to 0.50 (Figure 3). Pain was improved in the cyclobenzaprine group in week 4 only. No improvement in fatigue or tender points was noted at any time point.

The authors conclude that cyclobenzaprine improves global functioning of patients with FM, with a modest improvement in sleep quality and a small improvement in pain, but no effect on fatigue or tender points. The authors suggest future studies to clarify the true benefit of cyclobenzaprine in FM.

…Limitations Of Existing Formulations…

Despite the approved uses of cyclobenzaprine in treating muscle spasm, we believe current marketed formulations of cyclobenzaprine are limited for treating FM by unpredictable absorption and significant side effects. As described in the Flexeril package insert, the amount of cyclobenzaprine absorbed into the bloodstream varies between 33-55% of the dose ingested. The variability in absorption may be due to several factors, including effects of the stomach pH on dissolution. Food in the stomach and small intestine from a recent meal contributes to variability in absorption of the oral tablet as well.

Uncertainties in absorption make it challenging for a physician contemplating a bedtime treatment for FM to ensure the intended therapeutic effect is achieved without risking side effects like next-day drowsiness, which could result if the patient has too much cyclobenzaprine remaining in the bloodstream the next day. Plus, cyclobenzaprine has a half-life of 18 hours, meaning a significant portion of the drug would remain active in the body the next morning, potentially when FM patients are driving to work. We believe that currently available generic 10 mg immediate release oral formulations of cyclobenzaprine are not well suited for bedtime dosing.

The ideal formulation of cyclobenzaprine for FM would provide predictable absorption with rapid onset of action. Tonix believes that a very low dose (VLD) of cyclobenzaprine with improved bioavailability would be ideally suited for a bedtime dose in FM. The rapid onset means that patients are likely to receive a predictable therapeutic effect. The very low dose means that patients are less likely to experience residual side effects, including next-day drowsiness or effects on driving ability. And the sublingual dosing bypasses first-pass metabolism and variations in stomach pH and food effects.

Having witnessed the FDA's deep concern on the use of hypnotics and next-day driving, evidenced by the FDA's own insomnia workshop held in May 2011 and the Transcept Pharmaceuticals complete response letter in July 2011, we think a significant market opportunity exists for Tonix if they can gain approval for a sublingual very low dose cyclobenzaprine. We do not believe that the FDA would approve a 10 mg dose of oral cyclobenzaprine, in its existing formulation, for bedtime dosing due to the potential next-day residual effects.

Therefore, we believe that physicians, despite the availability of far cheaper generic alternatives, would consider prescribing a rationally designed dose and formulation of cyclobenzaprine specifically on improved absorption and to avoid concerns about next day residual effects and dangerous driving while cyclobenzaprine blood levels remain too high. We believe that if Tonix can demonstrate to the FDA that its sublingual VLD cyclobenzaprine, dosed at night, has acceptably safe blood levels, it would warrant market share gains upon launch.

Tonix & TNX-102-SL

Tonix Pharmaceuticals is currently developing a sublingual cyclobenzaprine product, TNX-102-SL, designed specifically for bedtime dosing in patients with FM. TNX-102-SL is a novel formulation with rapid absorption and minimal next-day somnolence.

…Phase IIa…

In December 2011, data from a phase IIa study with an oral formulation of cyclobenzaprine was published by the Sleep Disorders Clinics of the Centre for Sleep and Chronobiology, University of Toronto, Ontario, Canada (supported by Tonix Pharmaceuticals Inc.) in the Journal of Rheumatology (38(12):2499-2500). The trial was a randomized, double-blind, placebo-controlled, dose-escalating, parallel-design study in patients with FM and disrupted sleep. A total of 36 patients (1:1 VLD cyclobenzaprine vs. placebo) were treated for 8 weeks. Doses were taken between dinner and bedtime. The dosage was 1 mg for the first 7 days, after which, if clinically indicated and according to tolerability, the daily dose could be increased up to 4 mg (mean dose was 3.1 mg at week 8).

Tolerability: VLD cyclobenzaprine was well tolerated, with only 1 severe AE (headache) compared to five SAEs in the placebo group. The most common treatment-related adverse events can be found in Figure 4, and was comparable between VLD cyclobenzaprine and the placebo. There were no serious adverse events in either group.

Pain: Musculoskeletal pain was rated on a 7-point scale (0 - 6) and showed patients on VLD cyclobenzaprine had a 26% reduction at week 8 (1.7 vs. 2.3, p=0.010) vs. no change for the placebo (p=0.044 vs. placebo).

Fatigue: Fatigue was rated on a 7-point scale (1 - 7) and showed patients on VLD cyclobenzaprine had a 14% reduction at week 8 (4.3 vs. 5.0, p=0.039) vs. a 4% (not significant) worsening for the placebo (4.9 vs. 4.7) (p=0.126 vs. placebo).

Tenderness: Application pressure was applied to specific body regions to assess tenderness. Patients on VLD cyclobenzaprine showed a 30% improvement in tenderness (18.6 vs. 14.3, p=0.006) vs. 1% (not significant) for the placebo (16.1 vs. 15.6) (p=0.029 vs. placebo).

Mood: Mood scores were assessed by the Hospital Anxiety and Depression Scale (HAD). Patients on VLD cyclobenzaprine showed a 24% reduction in HAD score (10.4 vs. 13.7, p=0.012) and 22% reduction in HAD depression (4.9 vs. 6.3, p=0.017) vs. a 4% reduction in HAD score (15.1 vs. 15.7) and 10.4% worsening in depression (7.4 vs. 6.7) for the placebo at week-8. Scores for HAD (p=0.067) and HAD depression (p=0.023) vs. placebo showed encouraging trends.

(click to enlarge)

Subjective Ratings: The trial assessed both clinician-rated (CGIC) and patient-rated (PGIC) improvement scales for fatigue. Fatigue was evaluated using a scale of 5 ("worse") to 1 ("marked improvement"). VLD cyclobenzaprine treatment was associated with a statistically significant improvement in CGIC and PGIC in fatigue (p=0.003 and p=0.001, respectively). In contrast, placebo treatment did not result in statistically significant changes in any of these measures. However, relative to placebo, VLD cyclobenzaprine treatment did not significantly improve either measure (p=0.133 and p=0.257, respectively).

Effects On Sleep: Effects on sleep was assessed by using polysomnogram (OTC:PSG) recordings. PSG was performed at screening, at baseline, and typically at Weeks 2, 4, and 8. In the VLD cyclobenzaprine group from baseline to Week 8, total time awake decreased 38.5% (0.8 to 1.3 hrs, p=0.011), while total sleep time increased 12.3% (5.7 to 6.4 hrs, p=0.005), and sleep efficiency 15.6% (73.6% to 85.1%, p=0.023). In contrast, placebo treatment did not result in statistically significant changes in any of these measures. Compared to placebo, VLD cyclobenzaprine treatment did not significantly change total time awake, total sleep time, or sleep. Within the VLD cyclobenzaprine group from baseline to Week 8, VLD cyclobenzaprine treatment did not significantly change the percentages of Stage 1, 2, 3, or 4 or REM sleep (Figure 6).

(click to enlarge)

…Formulation Work…

In November 2011, Tonix received FDA clearance to initiate a comparative pharmacokinetic (PK) and bioavailability (BA) study of TNX-102. The comparative PK/BA study enrolled approximately 30 healthy adult volunteers who participated in a single-dose, open-label, randomized three-way-crossover study. The study compared a TNX-102 candidate gelcap (liquid filled capsule) containing a very low dose (2.4 milligrams) of cyclobenzaprine to a approved, immediate-release, 5 milligram cyclobenzaprine tablet. In addition, the effects of food on the PK of TNX-102 were investigated in subjects who are either fasting or fed with a high-fat, high-caloric breakfast.

In April 2012, Tonix released data from the PK/BA study. The data showed both TNX-102 2.4 mg promicellar gelcaps and the cyclobenzaprine 5 mg immediate release tablet were well-tolerated. There were no serious and/or unexpected adverse events.

The gelcap formulation preserved fundamental properties of the tablet including the rate of absorption and elimination of cyclobenzaprine. Absorption was measured by the time to peak plasma concentration, or Tmax, and elimination was measured by the half-life, or T½. Findings show similar Tmax and T½ between the two formulations under fed conditions, suggesting that TNX-102 retained the therapeutic beneficial effects on FM patients observed in the phase IIa study. When compared to the generic cyclobenzaprine 5 mg immediate release tablet administered under fasting conditions, TNX-102 had a lower extent and rate of absorption, as measured by the area under the curve (AUC) of the time and concentration data and also by the maximum concentration or Cmax.

No food effect was observed in the comparison of TNX-102 2.4 mg promicellar gelcaps between fed and fasting states, indicating this formulation provides dosing precision. Management believes the finding demonstrates that TNX-102 2.4 mg promicellar gelcap is clearly differentiated and not bioequivalent to generic cyclobenzaprine 5 mg immediate release tablet. This suggests that a commercial product based on the new formulation would be protected from substitution by pharmacists with generic cyclobenzaprine.

In late July 2012, Tonix completed another comparative bioavailability study testing a new 2.4 mg sublingual (SL) formulation of TNX-102. The phase Ib open-label trial enrolled 23 healthy volunteers looking at measures of cyclobenzaprine (and norcyclobenzaprine) in plasma and urine at various time points over a 72 hour period. Tonix also assessed the safety and tolerability of TNX-102-SL over a month long period.

The PK results demonstrated that the solution formulation of TNX-102-SL delivered cyclobenzaprine to the systemic circulation more efficiently than the sublingual solution of a simulated crushed tablet and faster than the ingested oral tablet. We believe this confirms the clinical utility of the drug and translates to more rapid effects compared with current generic cyclobenzaprine products, increased dosage precision and decreased potential for morning grogginess / residual effect.

…The Benefits of SL…

Tonix clearly now believes the path forward with TNX-102 is with the new sublingual formulation (TNX-102-SL), and we concur. The SL formulation dissolves quickly under the tongue and provides rapid absorption of cyclobenzaprine across the mucous membrane into the bloodstream. Pharmacokinetic data released in October 2012 confirms that dosing 2.4 mg TNX-102-SL yields higher cyclobenzaprine blood levels at 20, 30, 45, and 60 minutes post dose relative to generic 5 mg formulations.

As noted above, this avoids the pH variability and food effect seen with generic oral cyclobenzaprine. It also avoids first-pass metabolism in the liver. This is very important because cyclobenzaprine, when taken orally, is absorbed into the small intestines and transported directly to the liver where it is metabolized into norcyclobenzaprine. According to the literature, norcyclobenzaprine is a long-lived, psychoactive metabolite believed to interfere with cyclobenzaprine's efficacy over time, potentially contributing to the reported decrease of benefit of oral cyclobenzaprine in fibromyalgia when taken chronically.

(click to enlarge)

…Pivotal Program…

Tonix has recently finalized plans to begin its pivotal studies with TNX-102-SL. We expect the company to conduct two sequential phase III trials, with the first to start in the first quarter 2013. This first phase III trial is expected to enroll 76 FM patients at 8 to 10 centers in the U.S. (1 to 1 randomization) with a primary endpoint at 12 weeks of fibromyalgia-associated pain. We expect data from this program either late 2013 or early 2014. If successful, management will move into the confirmatory phase 3 program, which is expected to be larger in both number of patients (perhaps 200-300), duration of treatment (24 weeks), and include secondary endpoints (such as fatigue, tenderness, HAD, and HAD depression). Management's goal will be to show improvement in these secondary endpoints at 24 weeks in hopes to include the language on the final label. Overall, the program is similar to what Pfizer and Eli Lilly used to gain approval for Lyrica and Cymbalta, respectively, for the treatment of FM (pain & composite endpoints).

We assume the second phase III program will start during the first half of 2014. However, before this program starts we expect management to seek a development and commercialization partner. The partner would help fund the costs of the second phase III program, and market the drug if approved. If all goes well, we could be looking at a new drug application (NDA) for TNX-102-SL under the 505(2) pathway in early 2016. If approved, TNX-102 could become commercially available by the middle of 2017.

…Intellectual Property…

Intellectual property protection around TNX-102 consists of formulation technology and method of use patents. Tonix has been issued three U.S. patents to date on TNX-102:

(click to enlarge)

Tonix has been granted additional "Use of Composition" and "Composition and Methods" patents outside the U.S. that do not expire until August 2020 or beyond. The company has patent applications pending in the U.S. for treating fatigue using very low dose cyclobenzaprine, as well as for treating post-traumatic stress disorder and depression using very low dose cyclobenzaprine.

Tonix has obtained an exclusive worldwide option on a gelatin capsule formulation technology from Lipocine, Inc. protected by two U.S. patents (#6,294,192: "Triglyceride-free compositions and methods for improved delivery of hydrophobic therapeutic agents" and #6,451,339: "Compositions and methods for improved delivery of hydrophobic agents"). These patents expire on September 24, 2021 and September 16, 2022, respectively. However, we do not expect the company to move forward with the gelcap formulation. We expect all future clinical work will center around the new sublingual formulation.

Tonix has filed patent applications to protect the sublingual formulation of TNX-102. Management believes the new sublingual formulation supports a multi-tiered patent strategy that will provide exclusivity for TNX-102-SL to 2033. The company believes that results from preclinical and clinical pharmacokinetics and metabolic disposition studies warrant exclusivity and protection from generic alternatives. Specifically, the strategy is to obtain pharmacokinetics-based patent claims that would be difficult for generic companies to circumvent without infringement. Management does not know of any prior art that would prevent the issue of these new patents to protect TNX-102-SL.

…Sales and Commercial Potential…

Averaging the data obtained from the NIH, AFSA, and NFA, we estimate there are approximately 8 million Americans living with FM. Over 90% of these patients have sleep problems. Approximately 70% of FM patients report difficult in conducting normal daily tasks, such as light housework due to chronic fatigue. Existing approved FM medications such as Lyrica and Cymbalta, which focus on reducing FM-associated pain and mood disorder, respectively, do little to improve sleep quality. Insomnia medications such as Ambien and Lunesta improve total sleep time, but do little to improve the chronic fatigue associated with FM.

If Tonix can gain approval for TNX-102 in FM using standardized pain and tenderness endpoints in its phase 3 program, while also demonstrating improvement in symptoms of fatigue and sleep quality, we believe a meaningful market opportunity exists. Frost & Sullivan estimate that 50 million tablets of cyclobenzaprine were sold specifically for FM in 2010. We believe at least a third of FM patients would actively seek out prescription therapy, either as a monotherapy or an adjunctive therapy to Lyrica or Cymbalta, with their physicians support, and try a novel sublingual formulation of VLD cyclobenzaprine. Tonix has successfully designed a superior 2.4 mg sublingual formulation of cyclobenzaprine to the readily available oral 10 mg generic. Does that mean there will be no, or even limited, generic substitution or competition once TNX-102-SL hits the market? No.

Based on the generic market, the target population for Tonix with TNX-102-SL is over 2 million patients. We think that the sublingual formulation clearly contains meaningful advantages over the generic oral formulation. These include rapid absorption and minimal next-day residual effects - ideal for a bedtime dose, and avoidance of first-pass metabolism and build-up of norcyclobenzaprine - ideal for chronic dosing.

For the purpose of our model, we assume Tonix (and its partner) can capture 5% share. That's one out of every twenty patients currently on generic oral cyclobenzaprine for FM switching to TNX-102-SL. At a cost of $6-7 per pill ($2,500 per year by 2020), with decent tier-2 and tier-3 coverage, we see TNX-102 as a $300+ million peak drug. We expect that by 2017, both Lyrica and Cymbalta will be generic, and that the company's commercial partner will have one of the only (if not the only) branded prescription medications for FM available.

Conclusion

Phase II work sponsored by Tonix Pharmaceuticals clearly demonstrates proof-of-concept in patients with FM on validated endpoints including pain, fatigue, tenderness, and depression. The data is also suggestive of improved restorative sleep - a potential major differentiation in the treatment of FM. If the profile holds up through registration, TNX-102-SL could fill a significant void in current FM treatments.

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Tonix is currently wrapping up formulation work on a sublingual dose of TNX-102, and then plans to enter its first pivotal registration trial during the first half of 2013. We see little drug development or safety concerns with TNX-102. Cyclobenzaprine is a well known and understood molecule, first approved in 1977 for the treatment of muscle spasms. Since that time, the FDA has approved new low dose formulations (1990s), high-dose extended-release formulations (2007), and even entertained the idea of moving cyclobenzaprine OTC at 5 mg (ultimately deciding that the label indication of treatment for muscle spasms should remain prescription-based).

Following completion of its first pivotal phase III trial (data expected in 2014), we expect that Tonix will seek to secure a development and commercialization partnerships for the second phase III trial that includes an upfront payment, development and regulatory milestones, sales-related milestones, and royalties on sales. We see TNX-102 as a potential $300+ million opportunity in the U.S. alone, and believe that, if successful in its first phase III trial, Tonix should be able to secure a commercialization deal in 2014. With positive phase III data from a first registration trial, we believe Tonix should be able to secure over $25 million upfront for TNX-102, with development, regulatory, and backend sales milestones north of $250 million.

With those kind of catalysts on the horizon, Tonix Pharmaceuticals is clearly a name investors should get to know. We encourage investors to delve further into the story.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am an employee of Zacks Investment Research. Additional information on Zacks or Tonix Pharmaceuticals is available upon request.

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