Tonix Pharmaceuticals: Buy, Sell, or Hold? A licensing agreement with OyaGen for an antiviral inhibitor of SARS-CoV-2 contributed to small-cap pharmaceutical company Tonix Pharmaceuticals' (TNXP) ability to attract significant attention from young Robinhood investors. But is the stock a buy ahead of the release of interim results from trials of the company's lead CNS product, TNX-102 SL? Let's find out.

With a market cap of $346.10 million, Tonix Pharmaceuticals Holding Corp. (TNXP) is a clinical-stage pharmaceutical company whose pipeline is composed primarily of central nervous system (CNS) and immunology related candidates. The company's impressive product pipeline and an exclusive worldwide licensing agreement with OyaGen, Inc. in April 2021 for an antiviral inhibitor of SARS-CoV-2—TNX-3500, which is used for the treatment of COVID-19 and potentially other viral disorders, helped the stock attract significant investor attention and be listed on the popular Robinhood 100 list.

However, the stock has lost 41.8% over the past three months and 2.8% over the past month. It is currently trading 56.9% below its 52-week high of $2.46.

Investors' optimism surrounding its products helped the stock hit a $2.12 high on February 11, but it has been on a downtrend since. The company's financials for its last reported quarter were disappointing.

Click here to checkout our Healthcare Sector Report for 2021

Here are the factors that we think could influence TNXP's performance in the coming months:

Most of the Products Are Still in Developmental Stage

TNXP's lead CNS candidate—TNX-102 SL00—is still in mid-Phase 3 development and the results of an interim analysis are expected in the third quarter of TNXP's fiscal year 2021. The product is used for the management of fibromyalgia, which is a disorder characterized by chronic musculoskeletal pain, sleep deprivation, fatigue and mood changes. The company is expected to submit a New Drug Application (NDA) for the product to the U.S. Food and Drug Administration (FDA) in its fiscal year 2022, pending positive results from its second Phase 3 study.

A Phase 1 safety study using the company's TNX-1800 in humans is expected to start in the first half of fiscal year 2022, pending Investigational New Drug (IND) clearance from the FDA and the production of GMP material. It is also expected to submit an IND application to the FDA for TNX-1900 in the third quarter of its fiscal year 2021 and intends to begin a Phase 2 study of the product, which is used for the prophylactic treatment of chronic migraine in the United States.

Diluting Value of Existing Shares

In January, TNXP announced the closing of a registered direct share offering from which it generated roughly $40 million as gross proceeds. TNXP also closed a similar direct share offering on February 9, which generated roughly $70 million in gross proceeds.

Weak Financials

TNXP's research and development expenses for its fiscal first quarter ended March 31came in at $15.34 million, up 227.8% year-over-year. The company's general and administrative expenses for the quarter increased 106.4% year-over-year to $5.41 million. This can be attributed primarily to an increase in financial reporting expenses, patent prosecution and maintenance costs, and an increase in salaries and headcount.

The company's operating loss also increased 184.2% year-over-year to $20.74 million in the first quarter, and its net loss came in at $20.65 million, up nearly 184% year-over-year. Its loss per share was $0.07 compared to $0.37 in the prior-year period.

POWR Ratings Reflect Bleak Prospects

TNXP has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. TNXP has a D grade for Quality, which is in sync with its negative ROE and ROA.

The stock also has a D grade for Momentum. This is consistent with its 41.8% loss over the past three months and 2.8% loss over the past month. It has a D grade for Stability as well.

In addition to the POWR Ratings we've just highlighted, we've also rated TNXP for Growth, Value and Sentiment. Get all the TNXP ratings here.

TNXP is ranked #417 of 493 stocks in the F-rated Biotech industry.

Better than TNXP: Click here to access 25 top-rated stocks in the same industry.

Bottom Line

Investors' interest surrounding TNXP's products helped the stock soar in February 2021. However, there are few concrete developments on its part. Its lead CNS candidate is still in Phase 3 development, and even if it is approved there is no certainty that it will be successful commercially. So, we think it's best to avoid the stock now.

Click here to checkout our Healthcare Sector Report for 2021

TNXP shares were trading at $1.07 per share on Monday morning, up $0.01 (+0.94%). Year-to-date, TNXP has gained 58.52%, versus a 11.17% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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