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Joe Springer
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  • Email On Tonix

    We received a well-researched email so we sent one back:

    Thank you for your thoughtful message,

    I think $1 billion is a conservative estimate, $2 billion peak sales in FM looks there for the taking. I think the FM market is special RE: (1) very few such widespread diseases that all of a sudden come on the market (2) such motivated high treatment-seeking patient population (currently average almost 3 meds) (3) non-restorative sleep is pervasive.

    The NIH says 5 million Americans adults with FM, the best published estimates by Dr Clauw (possibly leading authority on FM, lead author on 1st 2 studies listed on NIH's site and also running BESTFIT) are 2-8%. So 5 looks low, a 2012 study says 2.4 million receiving treatment. If it is just $6 / day in revenue, less than 1/5 of those already being treated gives $1 billion. 2/5 gives more than $2 billion, and the market is growing at double digits. Like Dr. Lederman said on Thursday the only approved sleep quality treatment will likely be tried by most FM patients, and the large internet survey showed that more than half have already tried oral CBP off-label (most reported it helpful). (Update: one other point to make here is one that Dr. Lederman made last week - there are other SSRI drugs like cymbalta that theoretically might also work in FM, but cymbalta gets the sales because it is the researched and approved drug).

    The PTSD market is also special, the NIH says more than 8 million American adults have it each year, the only 2 approved treatments come with a black box warning, non-restorative sleep is again pervasive, treatments are lacking and like in FM patients take opiates and sedatives that are not shown to help and are now a problem. The Department of Defense has a big problem and they know it. $6 a day from 1/5 of 8 million comes to $3.5 billion. That may sound high but the only approved meds have a suicide warning, the off label options are not grand and/or risky, the only approved restorative sleep med should be widely prescribed and do quite well.

    I think data will be very good for a number of reasons that I've gotten into in the past, I think they have a good chance to not just get a really good p value in pain, but show statistically significant improvement in at least 2 other symptoms as well (they already did in depression and tenderness) - but the data does not even have to be blow-away. Cymbalta is the best selling med and it did not get statistically significant improvement in pain in one of its phase 3 primary endpoints, it was still approved on improvement in pain, and this was before the FDA recognized FM as a disease for special regulatory consideration.


    This was a phase-III, randomized, double-blind, placebo-controlled, parallel-group study assessing the efficacy and safety of duloxetine.


    There were no significant differences between treatment groups on the co-primary efficacy outcome measures, change in the Brief Pain Inventory (NYSE:BPI) average pain severity from baseline to endpoint (P = 0.053) and the Patient's Global Impressions of Improvement (PGI-I) at endpoint (P = 0.073). Duloxetine-treated patients improved significantly more than placebo-treated patients on the Fibromyalgia Impact Questionnaire pain score, BPI least pain score and average interference score, Clinical Global Impressions of Severity scale, area under the curve of pain relief, Multidimensional Fatigue Inventory mental fatigue dimension, Beck Depression Inventory-II total score, and 36-item Short Form Health Survey mental component summary and mental health score. Nausea was the most common treatment-emergent adverse event in the duloxetine group. Overall discontinuation rates were similar between groups.


    Although duloxetine 60/120 mg/day failed to demonstrate significant improvement over placebo on the co-primary outcome measures, in this supportive study, duloxetine demonstrated significant improvement compared with placebo on numerous secondary measures.

    And then the management is not just impressive, but so well-suited for exactly what they are doing - Dr Lederman has years of treating FM patients in addition to his executive background, the board has the JAZZ co-founder that ran sodium oxybate FM trials, the CMO's PTSD resume might be second to none, both the CEO and CFO are biotech patent authors and holders, the reach of the board is unbelievable, and then they got perhaps the very best person to develop their tension headache drug in Dr. Kellerman. (Update: while on this topic we should note the background of executives and directors in re-formulating and re-purposing central nervous system drugs, in Dr. Mario's case he sold a reformulation of an ADD drug for $11 billion).

    Tension headache again is a huge market with no good treatments - all the prescriptions contain a barbiturate and one has an opiate, not only are these treatments risky and banned in some places but they can lead to a really terrible and almost untreatable headache condition.

    I think whether they stay solo, get bought, or (most likely to me) some hybrid they will be valued at at least $1 billion with good data one way or another.

    All the best to you,


    Disclosure: The author is long TNXP.

    Tags: TNXP
    Aug 17 2:53 PM | Link | 37 Comments
  • Evaluating Risk Vs Reward With Kelly

    BESTFIT data is fast approaching for Tonix Pharmaceuticals (NASDAQ:TNXP) and we got a question about evaluating the risk vs reward, so we wanted to do a quick post about the Kelly Criterion.

    This is a formula that prescribes the optimal % of assets to wager given the risk vs reward:

    a formula used to determine the optimal size of a series of bets. In most gambling scenarios, and some investing scenarios under some simplifying assumptions, the Kelly strategy will do better than any essentially different strategy in the long run (that is, over a span of time in which the observed fraction of bets that are successful equals the probability that any given bet will be successful). It was described by J. L. Kelly, Jr in 1956

    Some more:

    The History
    John Kelly, who worked for AT&T's Bell Laboratory, originally developed the Kelly Criterion to assist AT&T with its long distance telephone signal noise issues. Soon after the method was published as "A New Interpretation Of Information Rate" (1956), however, the gambling community got wind of it and realized its potential as an optimal betting system in horse racing. It enabled gamblers to maximize the size of their bankroll over the long term. Today, many people use it as a general money management system for not only gambling but also investing.

    So given the probability of an event, and the ratio of the upside vs the downside of that event, the Kelly formula prescribes the optimal % of assets to wager.

    Here's the Formula:

    % to wager = [(R times W) - L)] / R

    R is the Ratio of the upside vs the downside

    W is the probability of Winning

    L is the probability of Losing (which is calculated as 1 − W)

    For example:

    Let's say someone gives you favorable 3 to 1 odds on a coin flip, what do you do? Things are clearly in your favor, but you still have a 50% chance of losing. Let's ask Kelly:

    The W and L are both .5 because there is a 50% chance of predicting a coin flip (1 would be 100% chance), and the R is 3 (upside to downside is 3:1).

    % to wager = [(R times W) - L)] / R

    % to wager = [(3 times .5) - .5] / 3

    % to wager = [(1.5) - .5] / 3

    % to wager = 1 / 3

    % to wager = 33.3%

    So if somebody gives you 3 to 1 odds on a coin flip, Kelly says you should bet one third of your assets.

    What if it is 10 to 1 odds on a coin flip? So tempting, yet a 50% chance of losing. Kelly?

    % to wager = [(10 times .5) - .5] / 10

    % to wager = [(5) - .5] / 10

    % to wager = 4.5 / 10

    % to wager = 45%

    A big chunk, but more than half stays safe.


    So we can apply this to Tonix at each step of the way with a (1) post-data price target and (2) odds of good data.

    R is calculated:

    Price Target on Good Data / (Current Price - Price Target on Bad Data)

    All for now, one caveat is that we think the Kelly formula is a good input, but nothing like the final word, which of course should have more to do with one's own personal risk tolerance.


    We happen to think the odds of good data are considerably better than 50%, we are not trying to imply anything with the coin flip example.

    Disclosure: The author is long TNXP.

    Tags: TNXP
    Aug 15 3:13 PM | Link | 16 Comments
  • New Tonix Price Target: Depends How High Chart Goes

    Jason Napodano's new article on Tonix Pharmaceuticals (NASDAQ:TNXP) says shares are fairly valued at $16. While we happen to think pre-data shares are more dear, we were stopped in our tracks when we saw this:

    (click to enlarge)

    As you can see, the chart only goes to $16.


    Ah well, three quick notes:

    1) We noted that Tonix filed its S-3 last week, a "Notice of Effectiveness" should follow at some point meaning that it has been accepted.

    2) Effective today Tonix is listed on The NASDAQ Global Market. The more choice pedigree should get some additional institutional eyeballs on the stock. CEO Dr. Seth Lederman:

    we believe that this move will expand Tonix's visibility to potential investors

    Some details from Nasdaq on the listing:

    The NASDAQ Stock Market has three distinctive tiers: The NASDAQ Global Select Market®, The NASDAQ Global Market® and The NASDAQ Capital Market®. Applicants must satisfy certain financial, liquidity and corporate governance requirements to be approved for listing on any of these market tiers

    Looks like a heads up move by management with big/huge BESTFIT data looming.

    3) Dr. Lederman is presenting at two conferences this week:

    Wedbush Life Sciences Management Access Conference
    Tuesday, August 12, 2014 at 9:45 am ET
    New York, NY

    Canaccord Genuity Annual Growth Conference
    Thursday, August 14, 2014 at 11:30 am ET
    Boston, MA

    Wedbush's conference is "for institutional clients of Wedbush Securities and by invitation only" and is not being broadcast.

    Canaccord Genuity's conference will be broadcast live - you can listen here.

    Disclosure: The author is long TNXP.

    Tags: TNXP
    Aug 11 9:05 PM | Link | 33 Comments
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