SunTrust: Tetraphase Antibiotic Has 'Blockbuster Potential'

In a report published Monday, SunTrust Robinson Humphrey analysts initiated coverage of

with a Buy rating and a price target of $48. The company's gram-negative focused antibiotic has "blockbuster potential," the analysts said. Eravacycline appears close to filing an NDA. In September 2014, the company announced positive results from the lead-in portion of the ongoing Phase III clinical trial for complicated urinary tract infections (cUTI). In December, there was an announcement of positive top-line data from the Phase III clinical trial for complicated intra-abdominal infections (cIAI). "Top-line results from the pivotal portion of the cUTI study are expected in mid-2015 and we assign a 90% probability of success," the analysts wrote. In the report SunTrust noted, "The data readout is a major inflection point for Tetraphase and positive results should drive strong stock performance. Tetraphase plans to submit an NDA by year-end 2015 and eravacycline's QIDP designation will entitle the antibiotic to a six-month Priority Review. We model eravacycline to launch in the U.S. market by year-end 2016." The global market potential of the antibiotic is expected to cross $1.3 billion. Although there is stiff competition, eravacycline is "differentiated." Although Merck's Zerbaxa received FDA approval in December 2014 and Avycaz by Actavis & AstraZeneca got approved in February 2015 for the same indications of cUTI and cIAI, both are "only available as IV formulations and administered three times per day" and must be combined with metronidazole for the treatment of cIAI "due to poor coverage of anaerobes," the analysts commented, while adding, "In contrast, eravacycline is available as an IV and oral and is administered twice-daily as a monotherapy in cIAI." Tetraphase has more than $280M in cash and can "readily establish a targeted sales force" for this antibiotic once it receives FDA approval. "The company is also in a position of strength for any and all partner negotiations that may occur," the analysts mentioned.