$heff's $tation of $tocks & $olid DD

[Bob Stocks]

TNXP Jbem's DD

TNXP DD--Information for New Investors

This pick is very similar to PTBI and I think that there will be considerable price appreciation in both the long and short term. If you are a long term investor the next 6-18 months could see you doubling your money or more. For those with more near term trading styles, upcoming catalysts will surely be a value driver. Much like my previous picks, this one has significant institutional ownership (with almost third of the outstanding shares picked up in the first 3 months of the year), insiders buying hand over fist, established management team, trading near recent lows, and it has been consolidating for a period of time after a significant drop.

Company: Tonix Pharmaceuticals

Ticker: TNXP

Company Presentation:

http://content.stockpr.com/tonixpharma/media/437bb08b99d48d6ac1286506d7e8133f.pdf

Here is a link to an interview conducted by analyst Joe Springer. It is a rather long interview, but gives you a good idea about the company and its pipeline. Within the first 5 minutes the CEO basically states their goal is to be acquired. It should be noted that Joe Springer has a price target of over $100 for TNXP!

http://seekingalpha.com/instablog/1117866-joe-springer/3770916-exclusive-interview-with-tonix-pharmaceuticals-ceo-and-cfo

Current Share Price: $6.64

Outstanding Shares: 16.1 million

Float: 7.4 million shares. See below for detailed breakdown

Market Cap: $107 million

With such large institutional and insider ownership, the float is relatively small. Given the large institutional and insider ownership, recent insider buying, and 3 advanced clinical trials this company is grossly undervalued. There are companies like GALE, IDRA, and INO that have nothing close to what TNXP has to offer and they are trading at valuations of 2X-6X that of TNXP right now! Heck, PVCT has a MC of $141 million and TNXP is sitting here at $107 million with a P3 trial that has just started and 2 P2B’s that are ongoing.

Cash: $58.7 Million or $3.62 per share! They completed an offering in February, in which all the shares were purchased by large institutions. There were no warrants involved in the offering, which indicates these large institutions believe that there will be a significant upside from these current levels.

Ownership Summary:
Insiders: 9.4%+

http://www.nasdaq.com/symbol/tnxp/insider-trades

Seth Lederman, CEO 662,519
Mario Ernest, Director 200,472

A few other insiders own shares but not to such a significant level. But here is the kicker and what I see as the most telling factor. Between 2-9-15 and 3-17-15 insiders went of a buying frenzy, purchasing shares on the open market! The CEO purchased 11 times on the open market, buying 15000 shares ($6-$7+) and director, Mario Ernst, purchased 34,000 shares on the open market as well. While this is not a staggering number of shares, insider buying of this magnitude and the rate at which it occurred has only been seen once before. In September 2013, insiders began scooping up a large number of shares on the open market. In the subsequent 3 months, after the buying stopped, the share price rose to over $20! The insider purchases can be found on the Nasdaq site.

http://www.nasdaq.com/symbol/tnxp/insider-trades

Institutional Holdings: 52% or 7,755,898 shares

Major Holders:

Deerfield Management 1,365,000

Broadfin Capital 1,176,639

Kingdon Capital Management 575,000

Technology Partners Fund 681,306

Sabby Management 600,000

The companies 13G’s can be found here:

http://www.nasdaq.com/symbol/tnxp/sec-filings

Other Institutional Owners Listed on NASDAQ as taking new positions

http://www.nasdaq.com/symbol/tnxp/institutional-holdings/new

Based upon the SEC forms, insiders and large institutions own 62%++ of this company. 8 well established institutions have just taken up positions and insiders went on a buying flurry, purchasing 50,000 shares in a 4 week period, and then nothing. Based on these calculations, there are around 7.5 million shares in the entire float; the rest is owned by the big boys. As an investor, I have to ask myself, “Why would so many institutions and insiders want to buy?” It’s either because the share price is a great deal at these prices or they expect something significant to happen in the near future. What might that be?

One potential explanation is that a partnership or buyout may be in the works. The CEO has stated repeatedly that he intends to have the company purchased or at least establish partnerships with large pharma. This is stated in the company’s presentation at the Roth Conference which can be found below. Coincidently, Pfizer’s P3 trial for adolescent fibromyalgia was recently concluded and the endpoints were not met. The Pfizer data was released on March 12th, at which point the insider buying abruptly stopped. TNXP recently received FDA approval for their P3 fibromyalgia study in January, which was then initiated in early May. As you will see below, the company is run by a number of individuals who specialize in creating companies and having them bought out by large pharma.

http://www.wsw.com/webcast/roth29/register.aspx?conf=roth29&page=tnxp&url=http://www.wsw.com/webcast/roth29/tnxp/index.aspx

CEO Seth Lederman- Co-founder of Vela, which was sold to Pharmos in 2006.

Vice President Ronald Notvest was the Senior Product Manager at Wyeth, before they were purchased by Pfizer for $68 billion.

Director Stuart Davidson- Founder/CEO of the genomic technology company Combion, which was acquired by Incyte Pharmaceuticals, Inc.

Director Ernest Mario- Led pioneering drug delivery technology company Alza until selling it to Johnson & Johnson in 2001.

Director Samuel Saks- Former CEO of JAZZ Pharmaceuticals and Senior Vice President at Alza before being purchased by Johnson & Johnson.

The management team and BOD all have past experience creating companies and selling them to large pharmaceutical companies or developing their own products and bringing them to market. Any way you look at it, these guys know what they are doing and have the knowledge and expertise to coordinate partnerships or a buyout.

Analysts Estimates: Price targets for TNXP vary, but in the near term, the consensus among analysts suggests that $14-19 should be an easy target within the second half of the year. Other analysts have placed a more aggressive valuation on TNXP, including Joe Springer of the Wall Street Exclusive who has placed a price target of $100 within the next few years. Personally, I believe TNXP will be bought out much before then.

I strongly suggest reading this article by Jason Napodano. He is an excellent author and does a great job of explaining the clinical pipeline as well as the basis for his valuation.

http://bionapcfa.blogspot.ca/search/label/Tonix%20Pharma

Upcoming milestones:

- Full data from BESTFIT at EULAR in June 11th, 2015

The abstracts for their presentations can be found here: http://globenewswire.com/news-release/2015/05/20/737587/10135259/en/Tonix-Pharmaceuticals-to-Present-Additional-Data-From-Completed-Phase-2b-Study-of-TNX-102-SL-in-Fibromyalgia-at-EULAR.html

- F203 Long-term safety study analysis from BESTFIT in August 2015

- Phase 2 data with TNX-201 in the Q4-2015

- Phase 2 data from AtEase in PTSD with TNX-102SL around mid-2016

- Phase 3 data from AFFIRM in fibromyalgia with TNX-102SL in the Q4-2016

As you can see, there are both significant short-term and long-term value drivers, that if successful, will surely drive the share price to $20 or more. A MC of $107 million for a company with $60 million in cash with these milestones is a joke.

Clinical Trials:

The company currently has 3 ongoing clinical trials.

Fibromylalgia: Tonix approaches the treatment of fibromyalgia by improving sleep quality. It is estimated that 90% of patients with fibromyalgia have problems with sleep quality, which leaves them feeling unrefreshed. By improving sleep quality, TNX-102 SL is intended to mitigate the pain and other symptoms frequently experienced by fibromyalgia patients. Tonix’s proprietary sublingual formulation is designed to be taken at bedtime to help achieve this profile. Our goal is to deliver physician and patient satisfaction by providing a medication that is effective, well-tolerated, and fosters patient adherence. The company has initiated it’s P3 trial and expects top line data in 2H2016.

In Sept 2014, the company reported that they did not meet the primary endpoint for their P2B trial in fibromyalgia and the stock price plummeted from over $14 to a low of $5.33. On the surface, this appeared to be a significant failure. However, the study met its other, secondary endpoints. The company engaged the FDA and received approval from the FDA to go ahead and conduct a P3 trial and not have to do another P2B. They were going to have to do a P3 trial anyway so nothing has changed. The primary endpoint was not met and other significant endpoints were so statistically significant that they FDA gave them the go ahead. The company has lost over half of its valuation for a trial that was perceived by the market as a “failure” but did not slow or hinder their clinical development. So nothing has changed since then, the company is doing the P3, but has also started other clinical trials, which adds value, and the company has not returned to its previous valuation.

Here is a quote from the CEO after meeting with the FDA:
"Getting this confirmation from the FDA – particularly its acceptance of the 30 percent responder analysis as the primary outcome measure – represents a clear step forward in our ongoing development of TNX-102 SL in fibromyalgia," said Seth Lederman, M.D., president and chief executive officer of Tonix

The 30 percent responder analysis is defined as an improvement in pain, as measured by the number of subjects who achieve at least a 30 percent improvement in their pain scores. In the Phase 2b BESTFIT study, TNX-102 SL demonstrated a statistically significant improvement in the 30 percent responder analysis, which was a pre-specified secondary outcome measure.”

So after meeting with the FDA, they were able to agree upon a P3 endpoint of “improvement in pain”, which was already found to be statistically significant in the P2B!

Post-Traumatic Stress Disorder (PTSD): PTSD is a chronic, severely debilitating condition in which patients experience nightmares and disturbed sleep and is associated with high rates of depression and suicide. Tonix is developing TNX-102 SLAttribution (cyclobenzaprine HCl sublingual tablet), a potential first-in-class drug that acts upon multiple neurotransmitter systems believed to regulate sleep quality. It offers the promise to provide benefit in PTSD, including relief from sleep disturbances and nightmares without common side effects associated with the approved class of drugs (SSRIAttribution) to treat this condition. This trial is specifically targeting Military Related PTSD. Top-line data is expected in 1H 2016.

Tension Type Headache: Tonix has completed a Phase 1 safety, tolerability, and pharmacokinetic study of TNX-201 in healthy volunteers. In this single ascending dose placebo-controlled trial, TNX-201 was well-tolerated at all doses studied, and showed a dose-related increase in pharmacokinetic parameters.

A Phase 2, double-blind, randomized, multicenter, placebo-controlled study to evaluate the efficacy and safety of TNX-201 for the treatment of a single episodic tension-type headache has been initiated.

With all of the prescription options for tension-type headache containing barbiturates, treatment options are limited and do not represent the current state-of-art in medicines. TNX-201 ((R)-isometheptene mucate) could potentially become the first single-agent prescription episodic tension-type headache treatment in more than four decades. Top-line data is expected in 4Q 2015.

Once again, please read Jason Napodano’s article describing each clinical trial and the basis for his short-term valuation of the company.

http://bionapcfa.blogspot.ca/search/label/Tonix%20Pharma

Management Team:

This is by far one of the most established and experienced management teams I have ever seen in a biotech with a MC of $100 million.

Seth Lederman, MD
Co-Founder, CEO & Chairman

Seth Lederman is a physician, scientist, and specialty pharmaceuticals entrepreneur. Prior to founding TONIX, from 2007-2008 Dr. Lederman co-founded and was a managing partner of Konanda Pharma Partners, LLC and Konanda Pharma Fund I, LP. He co-founded and served as director and chairman of its wholly-owned operating companies Validus and Fontus Pharmaceuticals Inc., which market Equetro® (carbamazepine – Extended Release), Marplan® (isocarboxazid) and Rocaltrol® (calcitriol). In 2000 Dr. Lederman founded Targent Pharmaceuticals to develop late-stage oncology drugs including pure-isomer levofolinic acid, which was sold to Spectrum Pharmaceuticals and is now FDA-approved and marketed as Fusilev® for colorectal cancer.

Leland J. Gershell, MD, PhD
Chief Financial Officer

Leland Gershell joined Tonix Pharmaceuticals as Chief Financial Officer in April 2012. Previously, Dr. Gershell was Managing Director and Senior Analyst at Madison Williams and Company, where he was responsible for research on specialty pharmaceutical and biotechnology companies. Dr. Gershell began his equity research career at Cowen and Company, and has also held analyst positions at Apothecary Capital, a pharmaceutical and biotech-focused investment fund, and at Favus Institutional Research, a boutique research firm that caters to institutional investors. Dr. Gershell's prior industry experience includes affiliations with Targent Pharmaceuticals, where he facilitated capital raising, and with Vela Pharmaceuticals, where he evaluated pharmaceutical assets for in-licensing.


Bruce L. Daugherty, PhD, MBA
Chief Scientific Officer

Bruce Daugherty joined Tonix Pharmaceuticals as Senior Director, Drug Development in April 2012, and was appointed Chief Scientific Officer in August 2013. Dr. Daugherty has extensive experience in drug development and basic biomedical research. For the majority of his career, Dr. Daugherty was with Merck & Co., most recently as Senior Research Fellow, where he was project leader for multiple drug discovery programs in the therapeutic areas of inflammation, immunology, respiratory, and cardiovascular diseases. Dr. Daugherty was an early pioneer in the humanization of monoclonal antibodies, and played a key role in Merck's chemokine biology program.

Ronald Notvest, PhD, MBA
Senior Vice-President, Commercial Planning and Development

Dr. Ronald Notvest joined Tonix Pharmaceuticals as Senior Vice-President, Commercial Planning and Development in June, 2014. Dr. Notvest comes to Tonix from Evidec, which he founded in 2002 and served as principal for 12 years. At Evidec, he provided in-depth financial and commercial assessments, as well as creating marketing and commercialization plans, for small and mid-size biopharmaceutical and specialty pharmaceutical companies. Prior to this, from 1992 to 2002, he served in several management positions at Wyeth Pharmaceuticals, including Senior Product Manager in the division of Specialty Products Marketing. Earlier at Wyeth, he managed the commercialization of a portfolio of early-stage and late-stage development drugs targeting CNS, asthma, immunology, cardiovascular, metabolic and endocrine disorders, and led the effort to prepare for the launch and marketing of an antihypertensive and an immunosuppressant.

Board of Directors:

Stuart Davidson
Director

Mr. Davidson served as President of the biopharmaceutical company Alkermes and Founder/CEO of the genomic technology company Combion. Mr. Davidson is a managing partner of Labrador Ventures, a Venture Capital firm focusing on technology companies. Mr. Davidson is co-founder and chairman of Sonen Capital, an asset management firm. Mr. Davidson has been involved in investing in early-stage companies for over 20 years. Mr. Davidson founded and served as CEO of Combion, Inc., which was acquired by Incyte Pharmaceuticals, Inc.

Patrick P. Grace
Director

Mr. Grace is Managing Partner of Apollo Philanthropy Partners, LLC, a New York-based strategic consulting firm serving private philanthropists and the nonprofit sector. Mr. Grace is an experienced senior executive with expertise in strategic planning, general management, finance, operations, supply chain management and the not-for-profit sector.

Ernest Mario, PhD
Director

Dr. Mario is a former Deputy Chairman and Chief Executive of Glaxo Holdings plc and a former Chairman and Chief Executive Officer of ALZA Corporation. Dr. Mario served in management at a number of drug companies before being named in 1989 Chief Executive of Glaxo, then the second-largest drug company in the world. During Dr. Mario's tenure, Glaxo brought five major new products to market and saw sales and profits increase by 15% annually. Later Dr. Mario led pioneering drug delivery technology company Alza until selling it to Johnson & Johnson in 2001. He subsequently served as Chairman and Chief Executive Officer of Reliant Pharmaceuticals, where he led the commercialization of LOVAZA(r), the first and only prescription omega-3 medication clinically proven to dramatically reduce very high triglycerides.

Charles E. Mather
Director

Mr. Mather served as a Managing Director at Janney Capital Markets from 2009 to 2015. He was most recently Co-Head of the Equity Capital Markets Group where he was responsible for public offerings, private placements, PIPES, registered directs and other financings. Previously, Mr. Mather served as Managing Director at Jefferies and, as Head of the Structured Equity Group, where he was responsible for the origination and execution of private placements for private companies, registered direct and PIPE offerings for public companies and special purpose acquisition companies.

Samuel Saks, MD
Director

Dr. Saks is former CEO of Jazz Pharmaceuticals (NASDAQ: JAZZ), which he co-founded in 2003. At Jazz Dr. Saks was responsible for the commercialization of Xyrem® (sodium oxybate) for cataplexy and excessive daytime sleepiness associated with narcolepsy. From 2001 until he joined Jazz, Dr. Saks was company group chairman of ALZA Corporation and a member of the Johnson & Johnson Pharmaceuticals Operating Committee. Prior to its acquisition by Johnson & Johnson (NYSE: JNJ) in 2001, from 1992 until 2001 Dr. Saks held executive positions at ALZA including Group Vice President, where he was responsible for clinical, regulatory and commercial activities.

Reading over the descriptions of the management team and the Board of Directors clearly shows that this team is not only medical experts, but financial experts as well. Many of the companies that they have managed have either been purchased by large pharma for staggering sums, or have gone on to receive FDA approval for multiple drugs. These guys are knowledgeable and experienced and I fully believe they intend to have Tonix acquired at some point.



The short and long-term potential for TNXP is amazing. With 60%+ of the shares being held by insiders and institutions, it is very clear that smart money believes in the potential of this company. The recent frenzy of insider buying and institutions picking up nearly 1/3 of the float in the first 3 months of the year strongly suggests that there will be significant developments in the near future. Deerfield, Sabby, and Broadfin Capital are some of the most established biotech investment firms and all have recently taken positions. Additionally the last time insiders bought shares on the open market at such a rate, the stock appreciated over 500% in the subsequent three months. All of their clinical trials are in either P2B or P3 trials and each will have top-line data readouts in the next 6-18 months. With nearly $60 million in the bank, there is little risk of further dilution at this time. The management team and BOD are composed of established scientific and financial minds with a long history of positioning companies to be purchased by large pharma. Respected analysts have placed near term price target of $14-$19, which represents well over 100% return from these current levels. For those willing to hold longer, analysts expectations range from $50-$100+. At this point, the downside risk for TNXP is minimal. Regardless of investment time frame, the severe undervaluation and upcoming catalysts make TNXP a compelling play.

My Plan: I have been watching this stock for a couple weeks and it appears to be under accumulation by some entity. I have watched the MM’s move the price in either direction using 100 shares sales/buys to trip larger sell orders. The trading very much reminds me of PTBI while Soros was increasing his position. With this in mind, I have put a significant portion of my portfolio in TNXP and plan on being patient. I would not be surprised if this traded like PTBI and maintained this price range despite buying pressure. Since this is not an OTC play, has strong institutional support, recent insider purchases at these same prices, the potential for partnership/buyout, a strong cash position, and many significant catalysts over the next year, I am comfortable placing a larger portion of my portfolio in this company. I do intend to trade around a core position, but the significant upside potential will cause me to be a little more patient.

Another Note: I understand that many people are hesitant to “chase” stocks, especially when they are on the OTC. The inherent volatility of the OTC market is not for investors who are risk adverse or faint of heart. With that being said, I complete thorough DD and do not invest in stocks that lack the fundamental aspects that support share price appreciation. For this pick, I intentionally sought out a non OTC stock that possessed all the characteristics in my “DD Formula,” and would appeal to both short and long term investors. There is a tendency for my picks to “run” following the release of my DD and even from this initial run, investors have been able to generate returns in excess of 30%++ in a very short amount of time. I strongly suggest that everyone form a plan based upon their own investment strategy and execute it properly. Always remember: Pigs get fat, hogs get slaughtered.



The ideas and opinions in this DD are my own. I have taken a long position in TNXP. I have received no compensation for this DD.