Gambling Drug Fails Trials; Somaxon Shares Lower

Somaxon Pharmaceuticals (SOMX-NASDAQ) has announced essentially failed results from the company’s Phase 2/3 clinical trial evaluating 20 mg and 40 mg of oral nalmefene hydrochloride, an opiate antagonist, in patients with a diagnosis of pathological gambling.

Nalmefene is an "opiate antagonist class" that did not demonstrate a statistically significant difference compared to placebo on the primary endpoint for Pathological Gambling.  Neither dose achieved statistical significance on the secondary endpoints in the trial. The most frequently reported adverse events were insomnia, nausea and dizziness. Elevation in liver enzymes was observed in some nalmefene-treated patients.

Somaxon intends to further assess the results and intends to assess the previously-reported results from its Phase 2 clinical trial evaluating nalmefene for smoking cessation before any program determination.

The company will now focus on completing and reporting the results from final Phase 3 trial for SILENOR(TM) for the treatment of insomnia, with results expected later this month.  Prior Phase 3 clinical trials evaluating SILENOR(TM) for the treatment of insomnia were positive and if all data is as prior stated Somaxon expects to file a New Drug Application (NDA) with the FDA in the third quarter of 2007.  The company has submitted the results of the genotoxicity studies to the FDA and is awaiting a response.

SOMX shares are down about 7% pre-market at $13.05, but shares were down 10% right afterthe news came out.  The 52-week trading range for SOMX is $9.69 to $21.24, and SOMX has an implied market cap of about $230 million after the 7% pre-market drop.  As of last quarter it had about $58 million in net liquid assets after liabilities and items were removed from the balance sheet.  Its only revenues are generated from partner and grant payments and it has a cash burn rate of $11M to $15M per quarter.

While the company isn’t going to be happy, gambling addicts with insomnia is something the casinos can’t hate too much.

Jon C. Ogg
December 5, 2006