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Joe Springer
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It is very hard or impossible to time the broad market consistently — there are no famous investors that got rich by consistently knowing what the broad market would do next. This only makes sense, as there are just too many variables in the broad market. But there are many famous investors who... More
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  • Tonix And The Celgene Contingency 10 comments
    Aug 2, 2014 1:45 AM | about stocks: TNXP

    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.

    Stocks: TNXP
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Comments (10)
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  • Genfit&Tonix
    , contributor
    Comments (104) | Send Message
     
    Thanks!
    So i don't have to double my position monday buying at $6,7..
    What a relief.. :)
    2 Aug 2014, 05:43 AM Reply Like
  • Genfit&Tonix
    , contributor
    Comments (104) | Send Message
     
    So your target price stays $60 plus for this year Joe ?
    2 Aug 2014, 06:08 AM Reply Like
  • Joe Springer
    , contributor
    Comments (2650) | Send Message
     
    Author’s reply » $61.53 values them under $1 billion, you could argue that's a conservative price on good results.
    2 Aug 2014, 12:13 PM Reply Like
  • retpdguy
    , contributor
    Comments (206) | Send Message
     
    Thanks for staying one step ahead of a potential hit piece by the shorts.

     

    MNKD has to be in the same position as Tonix in regards to the Celgene contingency.
    2 Aug 2014, 12:48 PM Reply Like
  • Joe Springer
    , contributor
    Comments (2650) | Send Message
     
    Author’s reply » Most welcome retpdguy, thank you.
    2 Aug 2014, 01:06 PM Reply Like
  • Joe Springer
    , contributor
    Comments (2650) | Send Message
     
    Author’s reply » One thing I wanted to say about the "makes complete sense" is that they have to have the credibility of preparing to go it alone, even if they'd prefer the right deal. And if they do it later instead of now it could appear that they "know" something about the data.

     

    The timing also makes sense in terms of clearing out the last S-3 a few weeks ago and communicating their preparedness to go it alone with this one.
    2 Aug 2014, 01:12 PM Reply Like
  • WolfnOne
    , contributor
    Comments (8) | Send Message
     
    Thanks for the information, but did you have to tell everybody? ::GRIN:: I was kinda hoping to add to my position just a little bit more next week were it to trip and fall a wee % or 5.
    2 Aug 2014, 01:38 PM Reply Like
  • RogerMexico
    , contributor
    Comments (23) | Send Message
     
    This is the rational interpretation. The implication and risk of future dilution would likely be in the context of extremely positive news and a skyrocketing stock price. If TNXP dips on news of the shelf Monday, it might make for nothing other than an excellent entry point. BTD if there is one. Market response to other recent biotechs filing S-3's would also support this strategy even as a short-term trading play before the BESTFIT results.
    2 Aug 2014, 01:59 PM Reply Like
  • DeeMmm
    , contributor
    Comments (43) | Send Message
     
    Thanks for the additional info Joe!
    2 Aug 2014, 05:59 PM Reply Like
  • Joe Springer
    , contributor
    Comments (2650) | Send Message
     
    Author’s reply » Spoke to the CFO today, update coming, no guarantees but I really think this is with the longer term in mind, no chance that they would peek results and then raise without sharing data first, no one will have a chance to see the results until they are delivered, everything seems very straight forward.
    CFO pointed out there is nothing imminent and the filing lasts to mid-2017, pointed out their commitment to timely transparency and that language in filing was unchanged (except for 201 in TTH will go to clinic in Q1 '15 instead of Q4 '14), no pushback on my pointing out their stated view that (1) data will be pivotal event and (2) they are currently well funded.
    3 Aug 2014, 01:43 AM Reply Like
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