Investing to Wealth

Somaxon Pharmaceuticals Inc. (NASDAQ: SOMX)

Somaxon Pharmaceuticals Inc. (SOMX) is a specialty pharmaceutical company focused on the in-licensing and development of product candidates for the treatment of diseases and disorders in the central nervous system therapeutic area. The Company’s product Silenor® (doxepin) has been approved by the FDA for the treatment of insomnia characterized by difficulty with sleep maintenance.

SOMX was founded in 2003 and is headquartered in San Diego, California.

Source: Reuters.com, SEC Filings.

Financial Summary

For the 2009 fiscal year, SOMX reported a net loss of $14.4 million, or $0.69 per share, compared with $37.2 million, or $2.04 per share, for the 2008 fiscal year. For the fourth quarter of 2009, net loss was $1.9 million, or $0.08 per share, compared with $9.5 million, or $0.52 per share, for the fourth quarter of 2008. As a development stage pharmaceutical company, SOMX had no revenues during 2009.

Research and development expenses for 2009 were $4.3 million, compared with $16.5 million for 2008. The decrease was primarily due to a decrease in drug development activities for Silenor as a result of the completion during 2008 of the Company’s cardiac study for Silenor and the delay in the FDA approval process for Silenor. Personnel and other costs and share-based compensation expense allocated to research and development personnel also decreased in connection with SOMX’s reduction in headcount.

Marketing, general and administrative expenses were $10.9 million for 2009, compared with $18.8 million for 2008. The decrease was primarily caused by a reduction in market preparation activities as a result of the delay in the FDA approval process for Silenor. Personnel and related costs also decreased as a result of the Company’s cost reduction measures, including the reduction in headcount. Share-based compensation expense allocated to marketing, general and administrative personnel increased due to the Company’s one-time stock option exchange program completed in June 2009 and due to arrangements entered into in connection with the reduction in headcount.

For 2009, SOMX recognized $6.2 million of share-based compensation expense, which is a non-cash expense, compared with $6.3 million for 2008.

Source: Reuters.com, SEC Filings.

Analyst Consensus

This is the consensus forecast amongst 0 polled investment analysts. Against the Somaxon Pharmaceuticals Inc company.

Source: www.ft.com

No consensus estimate analysis available.

Source: http://www.reuters.com/finance/stocks/estimates?symbol=SOMX.W

Investment Highlights

SOMX recently announced the FDA has approved the New Drug Application for Silenor (doxepin) for the treatment of insomnia characterized by difficulty with sleep maintenance. SOMX shares more than doubled on the news. According to the report, sleep maintenance difficulty, defined as waking frequently during the night and/or waking too early and being unable to return to sleep, is the most commonly reported nighttime symptom of insomnia.

Silenor is approved for the treatment of both transient (short term) and chronic (long term) insomnia characterized by difficulty with sleep maintenance in both adults and elderly patients. In clinical trials, the drug reportedly improved sleeplessness as well as early morning awakenings when compared to a placebo. In a press release, SOMX president and CEO Richard W. Pascoe stated, “We believe that 2010 will be a transformational year for Somaxon as we continue to execute on our business strategy, focusing on seeking a U.S. commercial partnership, building a U.S. commercial presence and preparing to launch this highly differentiated product in the second half of the year.

As result of the NDA approval for Silenor, SOMX will be required to make a $1.0 million milestone payment to its licensor for Silenor pursuant to its existing license agreement.  SOMX had $5.2 million in cash, cash equivalents and marketable securities as of December 31 and said it has sufficient funds to operate through the second quarter of 2010.

Source: http://www.somaxon.com/

Technical Analysis

Source: http://stockcharts.com

SOMX is trading above its 50 day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

SOMX’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, SOMX is trading above its upper Bollinger Band. Relative to recent price action, the stock is currently overextended and due for either a pause or retracement.

The MACD for SOMX currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9day moving average. Second, the MACD is above 0 which implies that the underlying moving averages are trending higher.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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