Somaxon Pharmaceuticals (SOMX) filed the new drug application (NDA) for insomnia drug Silenor in late January 2008. The FDA accepted the application in April 2008. Somaxon is currently in discussion with several interested parties for commercialization of the drug in early 2009. We see a partnership more likely to happen after the approval.
In the meantime, Somaxon is preparing to present additional phase III data on Silenor at upcoming scientific conferences designed to increase the awareness of the product ahead of the launch. At this point, the shares are enormously under-valued with a market capitalization of only $80 million. Management is sitting on $30 million in cash and less than a year away from launching a $500 million potential drug.
The biggest significant risk that remains for Somaxon beside the obvious FDA decision on Silenor is the potential wide-scale use of generic doxepin HCl 10mg as an alternative to 3mg Silenor. This risk seems overaggregated in our view, based on several points.
We believe that the stock is fairly valued at $12. We arrive at this figure by applying a 20x multiple to our 2011 EPS of $1.63 and discounting back to present day at 30%. Our $12 target equates to a market capitalization of $220 million, nearly triple the current value today.
Read the full analyst report on SOMX.
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