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TENX: FDA Response on Levosimendan

08/02/2017
By John Vandermosten, CFA

NASDAQ:TENX

On July 28, Tenax Therapeutics, Inc. (NASDAQ:TENX) announced the FDA’s response to their May pre-IND meeting on May 10th.  The meeting was held to review data regarding the completed Phase III Levo-CTS trial which had shown efficacy and safety in a subset of the trial’s population but a failure in reaching the primary endpoint.  The subset analysis showed efficacy for low cardiac output syndrome (LCOS) in coronary artery bypass grafting (CABG) surgery and acute decompensated heart failure (ADHF).  

Following the preliminary questions and concerns listed by the FDA, Canadian regulators also asked for an additional trial to be conducted and came to a similar conclusion as the FDA requesting an additional trial be conducted before considering an application for approval.  

While it is too early to determine the design, duration and cost of a new trial, we can look to the original Levo-CTS trial costs of approximately $25 million and duration of three years to project a ceiling on expense and length.  It is not clear at this point whether or not Tenax will even pursue another trial.  They may sublicense, return the license to Orion or take some other route.  If they do pursue another trial, we believe it will be after a strategic direction is chosen for the company.  

Assuming that another trial is pursued for Levosimendan, we believe the costs will be lower than the Levo-CTS trial due to a number of factors.  The trial size will likely be somewhat smaller given the narrower indication.  We list several assumptions below that support our estimate for another trial in the $15 to $18 million range.  

➢ ~700 patients sufficient to properly power the trial
➢ ~2 years to enroll
➢ Single endpoint of 90 day mortality
➢ 30 – 40 sites vs. 70 for Levo-CTS
➢ Lower CRO costs due to less data collection
➢ Can reduce trial set-up time by 3 to 4 months due to experience with Levo-CTS
➢ Total cost from $15 to $18 million

Given the FDA’s response the more important value driver at this point is the company’s next strategic move.  In this effort, Tenax is most likely to focus on the following two areas:
1) Acquisition of development rights for a new standalone asset
2) Combine with a company with a development plan in place that is seeking
a. Management team synergy
b. Public listing on an exchange

If a new asset is pursued, then it is possible that Tenax could run two trials at the same time which would include the follow up to Levo-CTS.  If a combination with another company is consummated, then the direction of the company and the decision on Levosimendan will be decided by the new board of directors and management team.

We anticipate an announcement regarding the company’s strategic direction in the next few months at which time we will re-evaluate our target price taking into account the company’s new direction.

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