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Transcept Pharmaceuticals, Inc (TSPT) reported narrower than expected losses last period, but the attention is still centered on the approval its new insomnia medication.

Estimates and shares are rising making this a hot Zacks #1 Rank (Strong Buy).

Company Description

Transcept Pharmaceuticals develops and commercializes proprietary products in the neuroscience field. The most prominent product is Intermezzo, which is awaiting approval from the FDA and treats insomnia patients.

Better than Expected Results

Last quarter, reported on May 16, Transcept reported a loss of $0.14 per share, which was 13 cents narrower than expected. This was the third consecutive earnings surprise.

They currently have $63.3 million left in cash and are averaging about $1.6 million per month in spending. Transcept brought in $3.1 million in revenue for the period from a license fee. That 24-month non-refundable fee has been coming in since August 2009 and will total $25 million when completed.

Investors are patiently awaiting the FDA's decision on Intermezzo's New Drug Application, which should be out on July 14th. Other popular drugs help patients fall asleep, but Intermezzo is will serve those who awake in the middle of the night.

Estimates Pop

After the quarterly report analysts raised both annual and quarterly estimates. The Zacks Consensus Estimate for 2011 is up 40 cents, to $0.89. Next year's jumped 32 cents, to $0.30.

The drop off in 2012 is due to the end of that licensing fee. While there is not the typical year-over-year growth of a typical aggressive growth company, the rapid and sharp upward estimate revisions are enough. Also, earnings should growth from 2012 and beyond.

The Chart

Investors are becoming increasingly confident about the FDA's approval. That has given shares of TSPT momentum as well as growth characteristics.

Transcept Pharmaceuticals, Inc - ticker TSPT>


Bill Wilton is the Aggressive Growth Stock Strategist for He is also the Editor in charge of the Zacks Small Cap Trader service

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