New DTC Program To Benefit TSPT Shares

Transcept Pharmaceuticals (NASDAQ:TSPT) has struggled to show compelling demand for its primary value driver, Intermezzo, which is marketed by partner, Purdue Pharmaceuticals in the U.S. Intermezzo is a novel rapid acting formulation of zolpidem, and is used to fall back to sleep after middle of the night awakenings.

Millions of Americans suffer with chronic middle of the night awakenings, and therefore Intermezzo could become a big selling drug (see our prior article). However, it has been my belief as a pharmaceutical equity analyst, that the disappointing launch of Intermezzo is due to sub-sufficient marketing and sales resources backing the product. A couple of months ago, I communicated this perspective to the company, and based on the recent announcement to increase the investment behind Intermezzo's marketing program, featuring TV advertising, it looks as though company management is responding (news summary below). With shares of TSPT trading essentially at cash ($5.29 per share in cash, equivalents, securities as of Sept. 30th), and a new direct-to-consumer (DTC) program that we believe will begin to favorably impact Intermezzo prescription trends, taking a position in the stock here makes sense. Expect TSPT shares to rise on the news of the Intermezzo DTC program.

After the market closed Monday, Transcept and partner Purdue announced that they are launching a national DTC promotional campaign, including digital, print and television advertising to support the commercialization of Intermezzo. According to TSPT, digital and print DTC campaigns for the drug began in November 2012, and television promotion is expected to begin in February 2013.

Purdue has committed $19M to this consumer advertising campaign, and TSPT plans to provide an additional $10M. This $29M program will be primarily executed during the first six months of 2013. Purdue plans to utilize for the first time its established analgesic sales force, which consists of approximately 525 sales representatives, to promote Intermezzo to primary care prescribers and certain medical specialists. This is in addition to the 275 reps hired specifically to sell Intermezzo per Purdue's initial commitment. More "feet on the street" behind the promotional effort plus the new DTC program are both very good news for Intermezzo and TSPT shares.