Conference Transcript - TNXP 2026-08-11

Gary Nachman, Analyst — Canaccord Genuity

I'm Gary Nachman, a senior biopharma biotech analyst at Canaccord Genuity, and we're very excited to have Seth Letterman, CEO of Tonics Pharmaceuticals, with us to discuss some recent exciting developments at the company. Seth co-founded Tonics back in 2007, so it's been quite a journey for you as you've built a pretty robust portfolio across several therapeutic areas, CNS, infectious disease, immunology, and rare disease. So great to have you with us today. If anyone has a question during the chat, please raise your hand, and we'll make sure to get to you. So you just reported solid earnings yesterday morning, so a busy couple of days for you. Maybe you could start with a quick overview of the company for people that aren't as familiar, what the strategy has been as you built out your portfolio, now have a few products on the market, and then the highlights from 2Q results with a focus on how you executed with the key product, Tanmaya, for fibromyalgia.

Seth Lederman, CEO

Great. Well, first of all, thank you all for coming. Thank you very much for having me and Tonics at the conference. And it has been an exciting couple of days, an exciting 15 years. The company is really founded around the idea of finding a better way to treat fibromyalgia. And we have taken a product from concept through lots of stage of invention, development, testing, FDA approval, and now launch. And we've done this all internally. And what we have today is a product that was approved a year ago. It was launched in November, and now after two full quarters of lunch, we have reported results yesterday where we had 11 million of net sales, which was approximately a triple over Q1. So we're getting good uptake from prescribers and patients, and it's very satisfying because we think that this is really going to, has the potential to change the treatment of fibromyalgia. But Tonics, to take a step back, over time, we have become a fully integrated company where we have things all the way from basic research through commercialization. But our real focus on this year and next year is going to be the launch of Tanmaya for fibromyalgia.

Gary Nachman, Analyst — Canaccord Genuity

Okay, so let's dig further into Tanmaya. We'll spend a bit of time on that. So maybe you could describe just how the product is differentiated in the fibromarket. It's a sublingual cyclobenzaprine, a non-opioid. so maybe talk about the efficacy and safety relative to other fibro drugs that are available and also where did your formulation technology come from and then what sort of IP exclusivity you have on it great well first of all let me back up and say I'm was a rheumatologist at Columbia Medical School back in a time when fibromyalgia was dismissed denigrated discounted by the faculty.

Seth Lederman, CEO

I was training in a junior faculty.

Gary Nachman, Analyst — Canaccord Genuity

Diagnosis by exclusion.

Seth Lederman, CEO

Yeah, but worse, worse, people said, it was that fibromyalgia doesn't exist. It's a made-up condition. It's just women complaining. There was a terrible framework of fibromyalgia rejection at that time. And something really brilliant was written by someone I'll get to in a minute, that There's a paradox of fibromyalgia. This is in 1975, 51 years ago. Harvey Moldovsky wrote, half of rheumatologists say they never see it, and the other half say it's the most common condition they treat. So I think today you would call that an affirmation bias or a confirmation bias. But clearly, if you're looking with your eyes covered, you're not going to see something. So it was always attractive to me to, you know, it had this attraction of the elephant in the room or the, you know, hidden in clear sight because the patients were desperate, it was an unmet need, etc. So big events in the history of fibromyalgia was in 2007, Lyrica was approved from Pfizer and that became a $5 billion peak sales blockbuster. And in 2008, Cymbalta was approved and became a $5 billion peak sale blockbuster. So those were big products and really opened up the field. But Lyrica works by basically kind of dulling the nerves. Fibromyalgia is a chronic pain condition. And Cymbalta is a little bit more refined because it does touch on this norepinephrine reuptake system. and there's an aspect of modulating pain in fibromyalgia where that's an important drug. But our work came from Harvey Moldovsky, who in 1975 made a bold assertion. He said, he wrote a paper, I know you think that fibromyalgia is a pain disorder, but I believe it's a sleep disorder. And he had a very provocative series of papers. One was a challenge study where he took undergraduates and sleep deprived them. And all the undergraduates except one developed widespread pain. So he really turned the paradigm on its head. And the one that didn't was a cross-country athlete. So not only did he, in a sense, upend the apple cart or whatever of fibromyalgia, but he also understood the important connection of fibromyalgia and exercise, which I won't have time to get to today. But basically, ours is the first product that targets the disturbed sleep in fibromyalgia. And in that way, it's fundamentally different from the other ways that fibromyalgia has been treated. So it's a little bit hard to compare our data versus Lyric and Cymbalta, because in 2016, the diagnostic criteria were revised. So our product is the only one that has been tested with the modern revised criteria. And in the old criteria, you needed 11 tender points, which were elicited by pressing in different points of the body. And ours, the modern definition does not have tender points. So I think, generally speaking, our group of patients that we studied would be generally milder or less severe than the patients that were treated with Lyric and Cymbalta. Another significant difference is that between when they were approved and when we were approved, the FDA has required a rigorous treatment for missing data. So the missing data analysis that we use is the modern one. And I'm not sure whether Lyrica and Cymbalta would be approved on the data they collected with the modern criteria. It's impossible to tell without their actual data set. But there was just a wonderful review of fibromyalgia in the New England Journal of Medicine, which shows how far we've come. I think it's the July 16th issue. But one thing that I think is not properly looked at is looking at our data relative to theirs in a head-to-head way, because when you have to account for missing data, it essentially is moving the hurdle higher, and also treating the modern definition of fibromyalgia is moving the hurdle higher. So I think it's hard to compare.

Gary Nachman, Analyst — Canaccord Genuity

Maybe we could just jump to the formulation, the sublingual cyclobenzaprine, just quickly, you have so much at the company to cover, and we only have like 15 or so minutes. Yeah, and then touch on just the IP excessivity, because we have these types of reformulations. It's always an important question, the durability of the asset.

Seth Lederman, CEO

Well, our drug is a sublingual and transmucosal formulation of cyclobenzaprine. Ironically, cyclobenzaprine was the first product ever studied systematically in fibromyalgia by Merck. Merck had it as a muscle relaxant at that time. People thought that fibromyalgia may be widespread muscle spasm. That idea has subsequently been disproven. There is no muscle spasm. But Merck did a long study, a six-month double-blind randomized placebo-controlled study. There was a benefit at one month and then it disappeared. Consequently, Merck killed the program. So I looked at that and said, well, maybe the glass is half full. There was a benefit at one month. So we studied carefully what was going on and made a hypothesis that actually there was the accumulation of a metabolite that blocked the effect and interfered with the durability of the effect. So in order to decrease production of the metabolite, we explored transmucosal delivery. And I think the success of our clinical trials shows that our hypothesis was probably correct, that it was the accumulation of this metabolite. So the formulation itself is quite unique. We recognized that we needed a formulation that had cyclobenzaprine and a base, But the cyclobenzaprine and the base were incompatible. The base attacked cyclobenzaprine and degraded it so that if you just put the two of them together, tablets would fall apart in one day at room temperature. But we made a eutectic formulation where two crystals co-penetrate, and the co-penetration of cyclobenzaprine into this other crystal protected it. So now in our tablet, we added the base, and we have four years of stability. So it's a fundamentally different product with the eutectic formulation. Our patents in the U.S. and worldwide go until 2034. We haven't heard about patent extensions yet, and we have other patents filed. But the eutectic patents go until 2034, so I think that's a reasonable base case. And I think they're pretty strong because they were attacked in Europe by Sandoz. And we won the patent interference case on all counts. So all of our claims stood up. So I feel that it's been road tested.

Gary Nachman, Analyst — Canaccord Genuity

Let's go to the ramp, which you highlighted in 2Q, you know, was really nice sequentially. So maybe just talk about how the prescriptions are meeting your expectations. We look at the weekly IQVIA data and it keeps grinding higher and the overall physician and patient receptivity. And then importantly, just, you know, formulary access. That's always a hurdle in these types of genericized markets. So how have you been able to progress on that front?

Seth Lederman, CEO

Yeah, so I think that we're winning on all counts. We had a relatively big quarter. Now, obviously, these are still small numbers. It was our second full quarter after launch. but we had growth in all of the categories. But I think that the anecdotal feedback we get from the sales team and from other sources is that the product is meeting our expectations, is that there's a range of responses. Some people say they don't respond. A lot of people say they respond. And a reasonable number, a smaller but reasonable number, say that the product has changed their lives.

Gary Nachman, Analyst — Canaccord Genuity

Is it more people that have tried other fibro drugs and failed or naive patients or a mix?

Seth Lederman, CEO

Well, so far, our marketing efforts are targeted on the 3 million patients who have been diagnosed and treated with fibromyalgia. We regard that as a marketing point of view as the low-hanging fruit. So they already come with having failed on prior medicines and they are doing well through the prior auth process. But our FDA approval is for first-line monotherapy. So it's being used in a variety of ways. But I think that most of the people that are being treated now have tried other medicines and are dissatisfied. In fibromyalgia, there's a lot of switching between medicines and also polypharmacy.

Gary Nachman, Analyst — Canaccord Genuity

Okay. And then Access?

Seth Lederman, CEO

Yeah, so in Access, we've had a few wins. I think everyone here would know there are three big PBMs. And on the commercial side, we already have contracts with two out of the three. And on the managed Medicare side, we have contracts with one out of the three. And we're optimistic about future contracts because the same reasons that motivate one to go to contract, we expect will motivate others. So we're doing well on that. And because we were doing well on access, on winning this access, we've announced an expansion of our sales force from 100 to 150. And we expect those new reps to be fully deployed in September. So, but generally speaking, you don't want to build demand ahead of access. You want it to be balanced, but we're pleased. But I think the reason that we are winning access is because this is a non-opioid analgesic. And chronic pain is a very important problem. It's an expensive problem for the system, for payers, and everyone else. And to have a non-opioid analgesic for a common chronic pain condition, I think, is a big win for everyone.

Gary Nachman, Analyst — Canaccord Genuity

Okay. So last one on this. can you frame the opportunity? Obviously, you're very bullish on it. The pieces are falling into place. You're expanding the sales force. This is a huge market. There hasn't been promotion in it for a long time. Have you publicly said this could be a blockbuster drug or given a range?

Seth Lederman, CEO

Yeah, we haven't announced our view of peak sales only because we're just at the stage of the launch. There's so much going on, it's hard to see. But, you know, as I said, the first two products approved became multi-billion dollar blockbusters, Lyrica and Cymbalta. Fibromyalgia, if anything, is more recognized now. The criteria are more favorable to us. The recognition of the condition is more favorable. And now there's also people have moved on from the idea of it being a diagnosis of exclusion, which means that it can be diagnosed in the context of other problems and whatnot. So we get more and more bullish about the opportunity all the time. I think the one other thing in our favor is tolerability, that the real reason why people discontinue Lyrica, Cymbalta, and other products is tolerability. And from the early signals that we're seeing out there and the feedback we get from the reps and the treating physicians is that this is a product that people find to be generally well-trained.

Gary Nachman, Analyst — Canaccord Genuity

And it's a chronic condition, so they're going to be on this indefinitely.

Seth Lederman, CEO

Yeah, our label is that this can be taken every night for months, years, decades. This is a chronic condition, and it's being addressed by a long-term nightly therapy.

Gary Nachman, Analyst — Canaccord Genuity

Okay. Let's shift gears. A very interesting pipeline product that you have that's been getting more attention is TNX4800 for the prevention of Lyme disease. For people that haven't heard your story, to go from fibromyalgia to Lyme disease, you're not going to hear in every presentation. So first, just discuss how you ended up with this. This is a monoclonal antibody, so very different from having a sublingual form of cyclobenzaprine, and how you ended up thinking about Lyme disease?

Seth Lederman, CEO

Well, as I said years ago, I was a rheumatologist at Columbia, and in the beginning, Lyme was a rheumatology problem. It was called Lyme arthritis. It took up a couple of years to change the title to Lyme disease, and Alan Steer, who figured out a lot of this, is now at MGH. So I've been following Lyme for many years, and also in my work at Columbia as a pioneer in therapeutic monoclonal antibodies and antibody engineering. So there were a lot of natural fits, but we actually licensed this from the University of Massachusetts Chan Medical School last year. And we are very excited about this. First of all, Lyme is a growing nuisance. 10 to 20% of people who get Lyme go on to have chronic Lyme, which can really be a devastating problem. So the idea to have a Lyme preventative, a next generation Lyme preventative was very exciting. And there was a great intellectual and passion fit between us and UMass Chan. So we took this on. All this year, we're manufacturing. So in 2027, we step back to start studies. We just announced positive meeting with the FDA. So I think the path is pretty clear for our phase two study starting next year. But there's a protein on Borrelia, the bacteria that causes Lyme, called OSP-A, outer surface protein A. This is a validated target for Lyme prevention because it was the target of a vaccine called Lymerix, which was FDA approved in 1998 and works pretty well. LimeRix was taken off the market in 2002 because of low sales. If you look at the heat map of Lyme in 2002, it was a different world. The incidence of Lyme has gone up very high, at least 3x in New England.

Gary Nachman, Analyst — Canaccord Genuity

What are the number of cases annually now?

Seth Lederman, CEO

Well, the number of cases is hard to figure out. The CDC says 500,000 cases a year, but it's very hard to figure out because how many cases get reported, how many people walk around taking doxycycline every time they think they've been bit, et cetera. So the case number is hard to know, but it's a real nuisance. And the problem with the vaccines is these vaccines are unlike any other vaccine because the site of action is in the mid-gut of the tick. The whole point is you get a high titer of antibodies in the, in the human. And when the tick bites the human, it sucks the antibody in with the blood and the antibody kills the tick in its mid gut. So we looked at this and I'm very pro vaccines. We have a pro, we have a vaccine program, but we looked at this and said a monoclonal antibody is actually a better strategy because you, there's no other vac, most vaccines work like you're setting a mousetrap. And when the human gets re-exposed to the pathogen, the mousetrap goes off. Not Lyme. If you were to go out hiking, you know, in the, what do you call it, in the commons? People are even getting Lyme in city parks now. But if you got Lyme disease tomorrow, it's unlikely that you would make any antibodies to OSP. And that's why people get Lyme over and over again, even several times in the season, because ospe is usually hidden from the human in the belly of the tick. So that's why we think that getting a long-acting antibody to ospe, a highly potent bactericidal antibody every year, is a much better strategy than hoping that a vaccine, multiple immunizations of the vaccine to ramp up your antibodies, it just doesn't seem like a great strategy.

Gary Nachman, Analyst — Canaccord Genuity

So let's talk about the design of the phase two study. And, you know, we only have a few minutes left and I want to cover one other area. And if you're in complete alignment with the FDA following the minutes, you're holding off a little bit just, I think, to get finalization, but you're supposed to start in the first quarter of next year. So just talk quickly about the design of the phase two.

Seth Lederman, CEO

Yeah, so it's a field study. So we are going to take a group of people, you know, and tell them to do what they normally do, including...

Gary Nachman, Analyst — Canaccord Genuity

But a big group of people.

Seth Lederman, CEO

A big group. Yeah, we're targeting 3,300 people. We're going to enroll them in Lyme endemic areas, and we're going to select people who engage in activities that put them at greater risk for Lyme. Hiking, golfing, gardening, excuse me, landscaping, that kind of thing. And the goal is to look at the number of cases of Lyme, Lyme disease, clinical Lyme, in the placebo versus the antibody group. So we actually have very good agreement. There really aren't any open issues. We just say that pending final approval of protocol, because they will review the protocol before we go live. But it's a very similar design to vaccine field studies. But in this case, we're using the antibody to provide the protection against Lyme instead of a vaccine.

Gary Nachman, Analyst — Canaccord Genuity

What are some of the challenges just with the infection rates, like people that are going to get bit? Because you have to do it over a couple of seasons. And you said you're probably not going to have final enrollment until 2028, probably.

Seth Lederman, CEO

Yeah, we're planning to do two seasons, where the first season, we're going to be enrolling the cohort that's an efficacy cohort, but we're actually doing a lot of safety work, which is the main reason why the first season will recruit fewer patients than the second season. It's really to fulfill our safety obligations with the agency. The second season will recruit a lot of patients. The one outstanding challenge is that there was recently a study done by Pfizer and Valneva on a Lyme vaccine that came up short, and they missed their primary endpoint, and they missed it in part because they had a low attack rate, but in part because the efficacy was a little bit lower than it had been reported from the earlier vaccine.

Gary Nachman, Analyst — Canaccord Genuity

What difference do you need in the attack rates? What's the study going to be powered to potentially show the STAT-SIG difference?

Seth Lederman, CEO

Yeah, so we're going for STAT-SIG. We haven't said all of the endpoints, but it's going to be a very similar endpoint to what Pfizer and Valneva did. And in their case...

Gary Nachman, Analyst — Canaccord Genuity

But it's single-digit percentage, right?

Seth Lederman, CEO

Well, they only had 19 cases in their efficacy analysis. um you know so 19 was uh i believe is 14 and 5 uh 14 on on placebo and 5 in the vaccinated group so you can imagine we need slightly more than that in terms of number of cases and slightly better efficacy but they they missed kind of by one it looks like so that's the kind of number of cases we need but they had a surprisingly low attack rate and we think we can do better by selecting sites and patients better.

Gary Nachman, Analyst — Canaccord Genuity

Okay. Last thing which you highlight, you feature in your pipeline, is phase two initiation of Tanmaya for major depression. So just talk about the rationale for using the drug for MDD, an even bigger opportunity than fibro, which is big in its own right, and just what gives you confidence in the profile of the drug in this market.

Seth Lederman, CEO

Yeah, thanks. This is a label expansion opportunity, we think. In an earlier study, in a different indication, we actually did the Madras, the depression endpoint, as an exploratory endpoint, and we had a nominal p-value with Tanmaya. And then in another study in fibromyalgia, we did the Beck depression inventory, and we had a nominal p-value. So we have, in two double-blind studies and different indications, we've gotten nominal P-values in treating depression. Our drug targets sleep quality, and bad sleep quality is a feature of depression. So this would be a completely novel way of treating depression. So we began enrolling that, and, you know, we're guiding that we should be wrapping up this study by the end of 2027 and hopefully reporting early in 2028.

Gary Nachman, Analyst — Canaccord Genuity

Awesome. Okay, we're out of time, so thank you, Seth, and good luck with all the progress, and we'll talk again soon. Thanks, everyone. Enjoy the rest of the conference.