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Tonix Secures $2.4 Million Through Private Placement

By Jason Napodano, CFA

On November 13, 2012, Tonix Pharmaceuticals (OTC Markets:TNXP) filed its Form 10Q, reporting financial results for the three month period ending September 30, 2012. The company did not record any revenues during the third quarter 2012. This was in-line with expectations. Tonix has not recorded revenues in 2011 or 2012, and we do not expect any revenues in the near-future.

Net loss reported for the third quarter 2012 totaled $1.7 million, or $0.05 per share based on a weighted average share count of 34.3 million. Loss was driven by $0.7 million in R&D and $1.1 million in SG&A. Loss for the first nine months of the year totaled $6.8 million. Tonix burned approximately $1.3 million in cash during the three months ended September 30, 2012. For the first nine months of the year, the operating and investing cash burn has totaled $4.2 million. Tonix exited the third quarter with approximately $0.1 million in cash.

...Private Placement...

On December 5, 2012, Tonix reported completing a Private Placement of approximately 6.4 million units to a group of new institutional investors and insiders that previously participated in a bridge financing completed in November 2012. Each unit was sold at $0.40 per share, and consisted of one share of common stock, one Class-A five year warrant to purchase stock at $0.60 per share and one Class-B one year warrant to purchase stock at $0.40. Net proceeds from the offering totaled $2.325 million

We forecast that cash burn in the fourth quarter will decline slightly from the $1.3 million burned in the third quarter and average $1.4 million burned per quarter so far in 2012. During 2012, the company conducted three pharmacokinetic / formulation studies with TNX-102-SL at a cost of roughly $0.5 million per study. We believe the company has wrapped up its formulation work and expect R&D expense to decline in fourth quarter. We forecast operating and investing burn in the fourth quarter of only $1.0 million, meaning Tonix should exit 2012 with approximately $1.4 million on the books.

We find this to be sufficient to fund operations into April 2013. However, we suspect that management would like to push forward into the planned phase 2b study with TNX-102-SL by the end of the first quarter 2013. As such, we expect management to raise additional capital in January or February 2013 through an S1. We expect the terms of this raise will be improved dramatically from the recent private placement, although we are, at the very least, pleased to see enough cash on hand today to complete the planning for the study.

Intrigued By The Potential

Tonix is developing a sublingual very low dose cyclobenzaprine product, TNX-102-SL, that offers improved pharmacokinetics and convenient sublingual dose formulation for the treatment of fibromyalgia (FM). We've written about TNX-102-SL in the past.

FM is a complex medical disorder characterized by widespread musculoskeletal pain, fatigue, lack of sleep, and mood and memory issues. The National Pain Foundation estimates that 90% of all FM patients have sleep problems. Tonix is developing a sublingual formulation of cyclobenzaprine designed specifically for bedtime dosing in order to help patients improve quality (restorative) sleep and reduce the next-day pain and fibro-fog that is persistent with FM.

We believe this is a meaningful opportunity for Tonix, mainly because currently approved FM medications, such as Pfizer s Lyrica (pregabalin) and Lilly s Cymbalta (duloxetine), do little to improve sleep quality. Plus, cyclobenzaprine is a well-known and commonly used medication already for FM. Market research conducted by Frost & Sullivan found that cyclobenzaprine was the third most commonly prescribed medication for FM behind Lyrica and Cymbalta in 2010. Decision Resources estimates that approximately 50 million cyclobenzaprine tablets were taken by FM patients, off-label, in 2011. That s 5% of the cyclobenzaprine market.

Our rating is 'Neutral' while we wait for an additional financing and the pivotal registration program to begin. A full copy of our report can be obtained via this link: Dec-5/TNXP

For additional information on Tonix Pharmaceuticals, please visit: SCR.Zacks.com