Somaxon Pharmaceuticals, Inc. (NASDAQ:SOMX) Finally Revenues In Sight
26 Aug 2010

Somaxon Pharmaceuticals, Inc. (NASDAQ:SOMX) stock became a mega gainer yesterday after the second for the year milestone event was announced.

SOMX surged 28.78% up to close at $4.34 on a volume, comparable only to the volume from the day on which the FDA approval for Silenor, the company’s one and only product, was announced: more than 31 million shares changed hands, or over seven times the average.

Along with the large gap up, the stock also noted its first for this year promotional disclosure. It seems that the milestone news about a fateful sales agreement have caught the attention of stock promoters and they did not hesitate to advertise the new huge and long-term gainer to their subscribers through an uncountable number of alerts.

Despite the FDA approval for Silenor in March this year, the company has still not generated any revenues from its only product and the announced yesterday co-operation agreement with Procter & Gamble was exactly what investors needed to hear. Silenor is supposed to be used for the treatment of insomnia characterized by difficulty with sleep maintenance. Under the agreement, P&G will help SOMX promote the drug and boost the sales in the USA through its team of full-time sales representatives.

Making the next important step towards the emergence from the development stage, SOMX shall launch Silenor next month and will target a market of 70 million Americans suffering from insomnia, from which it is believed that only 20% are currently under medical treatment.

Apart from all the excitement, it should be mentioned that Somaxon will pay P&G a fixed fee and a royalty fee as a percentage of the net sales on a quarterly basis during the term of the agreement. Further, it seems that Silenor will face severe competition, as there are already a number of established similar drugs for insomnia on the market.

SMOX attracts in addition with its lack of any kind of debt and its strong cash position. The company managed immediately to take advantage of the previous and much higher hype of their stock price in March. On the FDA approval, SMOX shares reached a price of above $10. At that time, the company issued 6.9 million new shares of its common stock in a public offering at a price of $8.25 per share. The net proceeds were around $52.7 million and they seem enough to cover the sales expenses for some time.

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