Market Overview

What Investors Should Be Watching In The Antibiotic Space

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The antibiotic space has been in the news frequently in the second half of 2014, and investors have taken notice.

The biggest headline was Merck & Co., Inc. (NYSE: MRK) offering $8.4 billion to acquire antibiotic giant Cubist Pharmaceuticals Inc (NASDAQ: CBST). The acquisition was for about a 35 percent premium over the previous close.

Last year, Cubist made headlines with its acquisitions of Trius Therapeutics, Inc. (NASDAQ: TSRX) and Durata Therapeutics Inc (NASDAQ: DRTX).

This year, Tetraphase Pharmaceuticals Inc (NASDAQ: TTPH) announced it is exploring a sale after receiving takeover interest.

According to reports, Tetraphase could attract interest from Actelion Ltd (OTCMKTS:ALIOF) and Roche Holding Ltd (VTX:ROG). On December 17, Tetraphase announced positive top-line results from its Phase 3 IGNITE 1 trial of Eravacycline in complicated intra-abdominal infections.

Year-to-date, the stock is up 183 percent.

What To Watch

Cempra Inc (NASDAQ: CEMP) has generally flown under investors' radars until recently; it's releasing new data in the first quarter of 2015.

Cempra is set to announce Phase 3 trial results of CEM-101 (solithromycin) for Community Acquired bacterial pneumonia (CABP). Solitrhomycin is a safer version of Ketek, which reached over $1 billion in peak sales. Positive results would de-risk much of the Cempra portfolio.

Other large indications include the Gonorrhea market, which includes only one effective and approved treatment.

FDA guidelines have made it easier for antibiotic companies to gain approval after releasing positive Phase 3 data.

The FDA requires that the antibiotic is safe, but does not require a large superiority in efficacy. This is fueled by the lack of new antibiotics on the market and the need for alternatives as bacteria adapts to current treatments.

Trius Therapeutics was acquired before FDA approval and Tetraphase is receiving interest just after releasing Phase 3 data. If Cempra announces positive Phase 3 data, this trend should bode well for the company in 2015.

Achaogen Inc (NASDAQ: AKAO) could also benefit from this trend, however its lead product candidate Plazomicin is in earlier stages of development.

Posted-In: antibiotic stocks the antibiotic sectorLong Ideas Trading Ideas


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