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  • Tonix And The Celgene Contingency

    Wanted to share some thoughts on Tonix' recently filed S-3:

    Going all the way back to the September 2013 Rodman Conference the CEO said that "plan A" is to get a big pharma partner after BESTFIT, and if they can't get the deal that they want then he said they'll do the "Celgene Contingency"

    "What calendar time would you be considering a partnership?" "So we expect to have the data, we're guiding second half of 2014, we expect to have everyone tee'd up to look at the data as soon as we have it, and then figure out who we are going to work with quickly after that. So everything takes longer than you hope, but I would think that by first quarter 2015 we would either have a partner or pursue this go it alone strategy. We refer to the go it alone strategy internally as the Celgene contingency, because Celgene repeatedly got low balled, and just decided they could raise money on their own and do just as good a job."

    They are blinded to the data, the study is wrapping up now, took place in 17 locations, and they will get the results in approximately 6-8 weeks.

    So they are looking for the best deal while weighing the go it alone strategy.

    The S-3 for $150 million is not at all binding, and by itself is not a capital raise, or dilution. It gives them the right to pursue the go it alone strategy.

    They had to file it at some time, filing it sooner and having the option open to not take a bad offer makes complete sense.

    They get results circa 6-8 weeks. The only other S-3 Tonix ever filed was filed 2 months before a raise.

    Also the CEO owns about 5% of Tonix and has never sold a share. Insiders own more than 20% and have never sold a share.

    The capital raises from the previous S-3 were 100% private placement, not selling on the open market, that $50 million previously raised is about 35% of the company or so. That's very large institutional ownership, just recently acquired, and "intimately" in private placements.

    So there is a strategic reason for the S-3, and it seems likely this is in the interest of shareholders.

    Anything else? The S-3 provided background on their approach with TNX-102 SL, and details on the FM market:

    As many products used for the treatment of FM are approved and marketed for other conditions, sales of these products related specifically to FM can only be estimated. Based on information obtained from publicly available sources, we believe U.S. sales of prescription drugs specifically for the treatment of FM totaled approximately $1.5 billion in 2012, and we believe this segment had grown at a compounded annual growth rate of approximately 14% between 2007 and 2012. Based on information obtained from publicly available sources, we believe 2012 sales of Cymbalta, Lyrica, and Savella in FM were approximately $600 million, $475 million, and $100 million, respectively. Cymbalta lost its U.S. patent exclusivity in December 2013.

    Despite the availability and use of a variety of pharmacologic and non-pharmacologic interventions, FM remains a significant unmet medical need. Many patients fail to adequately respond to the approved medications, or discontinue therapy due to poor tolerability. Prescription pain and sleep medications are frequently prescribed for symptomatic relief, despite the lack of evidence that such medications provide a meaningful or durable therapeutic effect. An important goal of FM treatment is to reduce the use of opiate analgesics as well as of benzodiazepine and non-benzodiazepine sedative-hypnotic medications by FM patients. Since CBP has no recognized addictive potential, we believe that TNX-102 SL, if approved, could reduce the exposure of FM patients to medications that have not been shown to be effective in treating FM and are associated with significant safety risks.

    Disclosure: The author is long TNXP.

    Tags: TNXP
    Aug 02 1:45 AM | Link | 10 Comments
  • What Is Tonix Worth?

    We are going to take a page from the great Chris DeMuth Jr. and open the floor for debate:

    What is Tonix Pharmaceuticals (NASDAQ:TNXP) worth?

    We offer three considerations:

    1) BESTFIT - the trial ends by August 4, here is some background

    2) Pipeline - All programs are advancing in quarters 3 and 4, Tonix has $50 million in cash - AtEase, TNX-201, TNX-301, small pox, and radiation protection (filing from July, and we confirmed with CFO as well):

    (click to enlarge)

    3) Pedigree - Consider the people involved, both management and the board of directors:

    • Chairman of the Department of Medicine at Columbia University (Dr. Donald Landry), who is also the co-founder along with the CEO
    • Founder/CEO of JAZZ Pharma (Dr. Samuel Saks)
    • Former CEO of Glaxo and Alza (Dr. Ernest Mario), also on the board at Celgene, he sold Alza for $11 Billion to J&J

    We think Tonix is soon to discover a much higher valuation and share price, what do you think Tonix is worth?

    Disclosure: The author is long TNXP.

    Tags: TNXP
    Jul 29 7:46 PM | Link | 89 Comments
  • It's The End Of The Coal As We Know It..

    The Powder River Basin has a whole lot of "clean" coal, and even though the EPA seems set against all coal right now, the PRB may end up a great energy investment one way or another.

    So we took note when Arch Coal (NYSE:ACI), the largest miner in the PRB, hit a 52-week low today.

    Time to buy?

    They've got a moon-sized deposit of coal, but also an ocean of debt, and a peninsula of no-earnings. Their debt is not due for a few years, but it appears as it is today they would likely not get reasonable financing and may have to declare bankruptcy.

    Their current debt is being sold by its owners as if the risks have increased substantially. Bonds issued a few years ago yielding 7.25% are now paying twice that, reflecting a lot more risk. This has accelerated sharply in the last 2 weeks:

    (click to enlarge)

    The last 2 weeks seem like a death knell, and Arch is not alone.

    Coal miner Alpha Natural Resources (NYSE:ANR) is in a similar situation:

    (click to enlarge)

    Walter Energy (NYSE:WLT) also looks like its days of borrowing are over:

    (click to enlarge)

    Peabody Energy (NYSE:BTU) still looks better than the three in trouble, but they are viewed with increasing risk:

    (click to enlarge)

    Is there any good news?

    The last couple of weeks has not been kind to Consol Energy (NYSE:CNX), but they still look in good shape:

    (click to enlarge)

    Finally, it looks like PRB pure-play Cloud Peak Energy (NYSE:CLD) is in good shape, the debt is sought after:

    (click to enlarge)


    In the past two weeks it appears that the collectively perceived credit quality of Arch, Alpha, and Walter have taken major hits. It seems like they will need some luck to avoid eventually running out of money, not being loaned any more, and declaring bankruptcy. This may not happen for years, but it seems like the decision has already been made by the bond market.

    This could prove a boon for the companies that are expected to survive, notably Cloud Peak and Consol, and perhaps Peabody. It could be that these companies are able to borrow more and pick up assets at fire sale prices as the troubled three sell to stay afloat.


    It's worth comparing these charts to the entire high yield (aka "junk") corporate bond market:

    (click to enlarge)

    The insatiable thirst for yield has created a lot of demand for below investment-grade bonds (again "junk", anything below the top 4 investment grades like AAA, AA, A, BBB).

    The fact that the three troubled companies' debt is unwanted against historically high demand is noteworthy.

    Tags: Coal
    Jul 26 2:14 AM | Link | 19 Comments
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