Medical Stocks That Can Make You Sleep

Josef Ray is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Silenor, a drug used to treat those who have trouble sleeping, is the focus in the commercial activities of Somaxon Pharmaceuticals (UNKNOWN: SOMX.DX). It has earned the specialty pharmaceutical company a gain in the stock market of 80% to $2.94 in the Dec 13 close. The medicine is approved by the FDA for the treatment of insomnia and is considered non-addictive. Results of clinical trials show that it maintains sleep to as much as seven to eight hours, meaning that it will give the sleep-deprived rest throughout the night with no residual effects in the daytime. Its effectiveness is stamped as it generated annual net sales of approximately $11.7 million as of September 30. 

Sales generated by the product earned Somaxon a spot in the top five gainers at the close of the trading day. This uptrend will continue to rise and a significant increase in trading looms ahead as their agreement with Pernix Therapeutics Holdings Inc (NYSEMKT: PTX) maker of children’s medicines, is finalized. The terms of this agreement states that Pernix will acquire Somaxon Pharmaceuticals at the cost of $25 million in a stock-for-stock transaction, as per approval of the Board of Directors of both companies, with pending approval of its shareholders. This buy-out is considered as one of the most notable mergers in the recent market movement.

The Silenor manufacturer is known as a leader in the certification, augmentation, and commercialization of branded products and late-stage product candidates. Its close competitor in the insomnia-treatment business, Transcept Pharmaceuticals (NASDAQ: TSPT) has launched its own brand Intermezzo, a prescription sleep aid effective for use by patients at the time they awake in the middle of the night, but have trouble going back to sleep. Its sales ramp has been a disappointment to investors where it has slid down from high expectations, thereby causing a dip in stock value. Silenor, on the other hand is expected to generate profit on an annualized basis in the vicinity of approximately $10 million to $15 million and earnings resulting from revenue in the range of close to $5 million to $10 million before interest, taxes, depreciation and amortization.

One analyst was quoted as saying that “the pharmaceuticals sector has been a source of strong growth, despite the potentially high-risk nature of a business heavily dependent on research and development of new products.” Naysayers declare that the market is volatile but without question, its long-growth potential is undisputed. Overseas tie up with other pharmaceutical companies boost sales, fueling an earnest effort in the clinical development of their products. Somaxon is only waiting for government approval to tie-up with Paladin Labs Inc. to sell Silenor in Canada, South America, the Caribbean, and Africa.

On December 12, Somaxon was a big percentage gainer along with Acura Pharmaceuticals. Its share hit an intra-day high of $2.92 on that day. The overall volume in the last trading session was 2.22 million shares. It's stock is foreseen to continue to rise as the merger with Pernix is formalized, and as people reach out to find a solution to their sleep problems that would require the use of an effective remedy.

In this world we live in where stress and pressure are like our shadow, sleep is a blessing. Yet some people are robbed of this benefit that some otherwise take for granted. I feel for my fellow human beings who are plagued with the inability to sleep or cannot go back to sleep once they are roused. Pharmaceutical groups are aware of the need for a medication that will effectively treat insomnia. The company who can be ahead in research and the enhancement of this medication will get a great percentage of market shares causing a jump in the value of their stock. Somaxon Pharmaceuticals is focused at providing and improving the solution for this worldwide need. As the market remains in its long-term uptrend, surely their efforts will be rewarded with discoveries and mergers that will eventually lead to a fruitful partnership for them and their shareholders.


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