Tonix Pharmaceuticals (NASDAQ:TNXP) investors are having a bad week. Hot off the heels of a devastating interim analysis from one of its late-stage clinical trials that looks all but doomed to end in failure, the stock's price has fallen well below $1.

Given that its other late-stage programs target notoriously difficult-to-treat conditions, including post-traumatic stress disorder (PTSD) and Alzheimer's disease, the entire company is looking quite frail. Still, daring investors may be wondering whether the biotech's stumble makes this the perfect time to buy in -- and they might be right.

Three scientists look worried as they consult a data readout on a tablet.

Image source: Getty Images.

What went wrong

On July 23, Tonix reported that phase 3 trials for its leading pipeline candidate, TNX-102 SL, would stop enrolling new patients with fibromyalgia. As a result of a worse-than-expected interim analysis, the trial's Independent Data Monitoring Committee (IDMC) recommended the halt, citing insufficient benefit to patients beyond what they'd experience with a placebo. 

Now the drug's fate is uncertain, but investors are likely incensed with management -- or at least confused. As recently as early June, the company had presented preliminary data suggesting that TNX-102 SL was more effective at reducing fibromyalgia pain than a placebo. It's unclear what happened in the trial between June and late July to change the story so much, and Tonix hasn't been forthcoming with details.

Investors will probably need to wait until the patients currently enrolled in the trial conclude their course of treatment so that the company can perform a definitive analysis. According to Tonix, that should happen sometime in the fourth quarter of this year.

Then there's the other problem: TNX-102 SL is also being investigated in late-stage clinical trials for PTSD, Alzheimer's disease, and alcohol use disorder. The drug was originally designed to treat fibromyalgia, not these other conditions. And more importantly, it was designed to improve sleep quality. If the results from the fibromyalgia trial are as poor as they seem at the moment, the drug may not perform much better in other disease contexts with equally challenging (but entirely different) complications that might get in the way of having restful sleep.

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Is there a rally on the horizon?

While its stock will probably take quite some time to recover from its recent lows, Tonix does have a few projects in the pipeline that could deliver future growth.​​

Specifically, it has an interesting portfolio of early-stage coronavirus medicines. While its two coronavirus vaccine candidates might struggle to gain market share by the time of their approval (assuming they get that far), Tonix's therapies for acute coronavirus infections and for long COVID could fill much-needed gaps in the treatment landscape. Nonetheless, it's important to recognize that the pandemic might well be over before some of these programs make it through the clinical trials process, unless the business can secure a regulatory clearance for an accelerated pace of development. 

In total, the company plans to have three programs entering into phase 2 trials by the end of 2021. That means 2022 and 2023 could easily be better for investors than this year.

And investors can be confident that Tonix will survive for the near future. With just over $164 million in cash and only $36.15 million in research and development (R&D) expenses in 2020, the company has plenty of runway before it needs to start worrying about liquidity. So, the situation with TNX-102 SL is a major setback, but it isn't necessarily indicative of what Tonix will be able to accomplish in the next few years. 

All that said, investors should note that betting on the company's turnaround is quite risky. After all, the biotech still has no products on the market, and it won't for at least another couple of years at a minimum.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.