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Somaxon Pharmaceuticals Inc. (SOMX) Prepares for December Insomnia Decision from FDA, Trims Costs and Generates Capital

Working in the big leagues of the pharma world allows little room for error. Make a misstep and quite a bit of capital can be lost. Get the process right, however, and quite a bit of profit can be made. Starting out as a development stage company, in this regard, is never easy but if that first product can get to market, profit will flow for the investor that sticks with it from the beginning.

Somaxon Pharmaceuticals inc., a development stage biotechnology company, works to develop specialty pharmaceutical products directed at disease and psychological issues. It is, for the most part, an in-licensing company and is currently completing Phase III trials for an insomnia product.

Although the company has completed much of its Phase III testing for Silenor, its insomnia product, the FDA has been asking for additional efficacy information regarding elderly patients. The FDA, however, indicated to the company that it did not find any safety issues regarding the product. Its only interest for more information was in regards to one particular aspect of the products testing methodology. After resubmission (recently completed and acknowledged), the company expects a response from the FDA by mid-December 2009. Although the speculative nature of an FDA re-submission response is just that, speculative, it does seem that approval of the insomnia product is likely. With this in mind, the company has begun to move forward with additional funding and licensing sales. Potential customer base for the product is 70 million people in the US alone.

Being a developmental stage pharmaceutical company presents certain challenges. Among these issues are passing the first product introduction test with the FDA, potential licences and cost controls. The company does appear to have dealt well with the product introduction aspect, although the FDA will have final say. The company is dealing quite well with cost controls and the seeking of licences.

In the company’s second quarter overall costs have decreased substantially while revenue generation, from stock issuance, have increased markedly (approximately $6 million.) In a general sense, employee numbers have been reduced, compensation has been shifted to stock based programs, development costs have been reduced (past providing FDA information for resubmission) and licensing options have progressed. As Somaxon awaits FDA approval for its flagship product, the company appears ready to position itself for its next growth phase.

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