Tranzyme: Assessing The Implosion & Prospects Ahead (TZYM)

Tranzyme, Inc. (NASDAQ: TZYM) is showing the dark side of the risks around biotech initial public offerings.  After less than a year since its initial public offering, this stock just lost more than 40% of its market value after its experimental bowel drug candidate failed to improve post-surgery gastrointestinal recovery.  This was the first of two late-stage trials and unfortunately it performed no better than the placebo in Phase III.

While a second trial is ongoing, Tranzyme does not plan any new drug application efforts as the company is shifting its focus into an oral program.  More data from the second late-stage study is expected to be released late in the second quarter of this year.

The placebo-comparison was in both dose groups.  The company’s other effort is focused on an oral drug TZP-102 in a phase II trial aimed at treating diabetic gastroparesis.

Shares were down well over 50% but there has been a bounce as investors still hold out some hope for the company.  One thing that may hurt is that the value is now only $71 million after a 43% drop to $2.97.  As of the end of 2011, Tranzyme still had $40.9 million in cash and cash equivalents and a total net tangible asset value of about $24.5 million.

Tranzyme may be down, but its prospects are not entirely out here as of today.

JON C. OGG