Yesterday, SOMX stock repeated Tuesday’s drop down, losing another 4.58% of its value. The share price closed the market at $3.96 and it seems that last week’s rush has been somewhat overhasty and hyped. The big news about the co-promotion agreement with P&G for the launch of SOMX’s one and only developed and marketable product Silenor let some investors believe the company will suddenly emerge from its development stage and report some revenues.
The excitement was in addition fueled by the stock’s first promotion for this year, but now the uptrend that just started seems unlikely to last. Silenor has been approved by the FDA for the treatment of insomnia in March this year. Since then, however, the company has not managed to make any sales from it. Though, it managed at least to boost up its cash position on the huge rush of the stock price.
At that time SOMX shares reached a market value of over $10 each and the company immediately sold almost 7 million new shares of its stock in a public offering for the total net proceeds of $52.7 million. By the end of June, that amount of cash still remains the largest portion of SOMX total assets of $57.5 million.
Thus, after the initial hysteria, investors must have noticed that most of that cash will have to be spent on advertising and launching Silenor, the profits from which do not seem that secure as the market competition will be severe. Further, P&G has not taken much of financial risk and Somaxon will pay a fixed fee and a royalty fee as a percentage of the net sales on a quarterly basis during the term of the agreement.
