Trius Acquired Last Week, Could Tetraphase Be Next? Print E-mail
By Scott Matusow   
Monday, 05 August 2013 11:33

Last week, Cubist Pharmaceuticals Inc. (CBST) agreed to buy Trius Therapeutics Inc. (TSRX) and Optimer Pharmaceuticals Inc. (OPTR) for as much as $1.62 billion. Cubist agreed to merge with Trius for $13.50 a share or about $707 million in cash, which at this time, many believe other bidders will step in with a higher bid, and/or Cubist will be forced to raise its bid to over $15.

With the Generating Antibiotic Incentives Now (GAIN) act "gaining" traction, we expect other anti-biotic companies to be acquired in short order. Sponsors filing a NDA under this act would be issued 5 years of market exclusivity in addition to the standard 5 years of exclusivity for a new chemical entity. Therefore, Tetraphase under the current conditions would therefore qualify for 10 years of market exclusivity.

Big Pharma certainly likes it exclusivity, so again, we do expect more of these anti-biotic companies to be acquired. We believe the opportunity for both traders and investors is strong here, and opportunity is what we all are looking for in the market!

Tetraphase (TTPH) is a clinical stage biopharmaceutical company, engages in the development of various antibiotics for the treatment of serious and life-threatening multi-drug resistant infections through its chemistry technology. Its principal products include eravacycline, an intravenous and oral antibiotic that use as a empiric monotherapy has completed the Phase II clinical trials for the treatment of multi-drug resistant Gram-negative infections; and eravacycline oral formulation that is in Phase I clinical trials to treat complicated urinary tract infections in intravenous-to-oral step-down therapy. The company’s products that are under development comprise TP-834; and TP-271 that is in preclinical trials for the treatment of respiratory diseases caused by bacterial biothreat pathogens, as well as engages in the development of Pseudomonas/Gram-negative program.

Since its inception six years ago, Tetraphase has developed a strong pipeline. The company completed a Phase 2 clinical trial with the IV formulation of its broad spectrum lead candidate, eravacycline, in mid-2012. The company is also studying an oral formulation of eravacycline and has several additional candidates in preclinical development. Importantly, Tetraphase's pipeline antibiotics offer significant differentiation from drugs that are currently on the market or in development by other companies.

Tetraphase Pipeline:

According to the company's website;

Eravacycline (TP-434)
We are developing our lead product candidate, eravacycline, as a broad-spectrum intravenous and oral antibiotic for use as a first-line empiric monotherapy for the treatment of multi-drug resistant (MDR) infections, including MDR Gram-negative bacteria. We developed eravacycline using our proprietary chemistry technology. We recently completed a successful Phase 2 clinical trial of eravacycline with intravenous administration for the treatment of patients with complicated intra-abdominal infections (cIAI).

Eravacycline is a novel, fully synthetic tetracycline antibiotic. We selected eravacycline for development from tetracycline derivatives that we generated using our proprietary chemistry technology on the basis of the following characteristics of the compound that we observed in in-vitro studies of the compound:

·         potent antibacterial activity against a broad spectrum of susceptible and multi-drug resistant bacteria, including Gram-negative, Gram-positive, atypical and anaerobic bacteria;

·         potential to treat the majority of patients as a first-line empiric monotherapy with convenient dosing; and

·         potential for intravenous-to-oral step-down therapy.

In in vitro studies, eravacycline has been highly active against emerging multi-drug resistant pathogens like Acinetobacter baumannii as well as clinically important species of Enterobacteriaceae, including those isolates that produce ESBLs or are resistant to the carbapenem class of antibiotics, and anaerobes.

Based on in vitro studies we have completed, eravacycline shares a similar potency profile with carbapenems except that it more broadly covers Gram-positive pathogens like MRSA and enterococci, is active against carbapenem-resistant Gram-negative bacteria and unlike carbapenems like Primaxin and Merrem is not active against Pseudomanas aeruginosa. Eravacycline has demonstrated strong activity in vitro against Gram-positive pathogens, including both nosocomial and community-acquired methicillin susceptible or resistant Staphylococcus aureus strains, vancomycin susceptible or resistant Enterococcus faecium and Enterococcus faecalis, and penicillin susceptible or resistant strains of Streptococcus pneumoniae. In in vitro studies for cIAI, eravacycline consistently exhibited strong activity against enterococci and streptococci. One of the most frequently isolated anaerobic pathogens in cIAI, either as the sole pathogen or often in conjunction with another Gram-negative bacterium, is Bacteroides fragilis. In these studies eravacycline demonstrated activity against Bacteroides fragilis and a wide range of Gram-positive and Gram-negative anaerobes.

Key Differentiating Attributes of Eravacycline
The following key attributes of eravacycline, observed in clinical trials and preclinical studies of eravacycline, differentiate eravacycline from other antibiotics targeting multi-drug resistant infections, including multi-drug resistant Gram-negative infections. These attributes will make eravacycline a safe and effective treatment for cIAI, cUTI and other serious and life-threatening infections for which we may develop eravacycline, such as ABSSSI and acute bacterial pneumonias.

·         Broad-spectrum activity against a wide variety of multi-drug resistant Gram-negative, Gram-positive and anaerobic bacteria. In our recently completed Phase 2 clinical trial of the intravenous formulation of eravacycline, eravacycline demonstrated a high cure rate against a wide variety of multi-drug resistant Gram-negative, Gram-positive and anaerobic bacteria. In addition, in in vitro studies eravacycline demonstrated potent antibacterial activity against Gram-negative bacteria, including E. coli; ESBL-producing Klebsiella pneumoniae; Acinetobacter baumannii; Gram-positive bacteria, including MSRA and vancomycin-resistant enterococcus, or VRE; and anaerobic pathogens. As a result of this broad-spectrum coverage, eravacycline has the potential to be used as a first-line empiric monotherapy for the treatment of cIAI, cUTI, ABSSSI, acute bacterial pneumonias and other serious and life-threatening infections.

·         Favorable safety and tolerability profile. Eravacycline has been evaluated in more than 250 subjects in the Phase 1 and Phase 2 clinical trials that we have conducted. In these trials, eravacycline demonstrated a favorable safety and tolerability profile. In our recent Phase 2 clinical trial of eravacycline, no patients suffered any serious adverse events, and safety and tolerability were comparable to ertapenem, the control therapy in the trial. In addition, in the Phase 2 clinical trial, the rate at which gastrointestinal adverse events such as nausea and vomiting that occurred in the eravacycline arms was comparable to the rate of such events in the ertapenem arm of the trial.

·         Convenient dosing regimen. In our recently completed Phase 2 clinical trial we dosed eravacycline once or twice a day as a monotherapy. Eravacycline will be able to be administered as a first-line empiric monotherapy with once- or twice-daily dosing, avoiding the need for complicated dosing regimens typical of multi-drug cocktails and the increased risk of negative drug-drug interactions inherent to multi-drug cocktails.

·         Potential for convenient intravenous-to-oral step-down. In addition to the intravenous formulation of eravacycline, we are also developing an oral formulation of eravacycline. If successful, this oral formulation would enable patients who begin intravenous treatment with eravacycline in the hospital setting to transition to oral dosing of eravacycline either in hospital or upon patient discharge for convenient home-based care. The availability of both intravenous and oral administration and the oral step-down will reduce the length of a patient's hospital stay and the overall cost of care.

Additionally, in February 2012, Tetraphase announced a contract award from the Biomedical Advanced Research and Development Authority (BARDA) worth up to $67 million for the development of eravacycline, from which Tetraphase may receive up to approximately $40 million in funding. The contract includes pre-clinical efficacy and toxicology studies; clinical studies; manufacturing activities; and associated regulatory activities to position the broad-spectrum antibiotic eravacycline as a potential empiric countermeasure for the treatment of inhalational disease caused by Bacillus anthracis, Francisella tularensis and Yersinia pestis.

TP-834
TP-834 is in preclinical development for treatment of moderate-to-severe community-acquired bacterial pneumonia (CABP) with IV/oral administration. TP-834 will be developed as a monotherapy with once-daily dosing targeting key CABP pathogens, including penicillin- and fluoroquinolone-resistant organisms and atypicals. Tetraphase has demonstrated that TP-834 has excellent in vitro potency and in vivo efficacy.

TP-271
TP-271, a novel antibiotic currently in preclinical development, is being developed to combat respiratory disease caused by bacterial biothreats and antibiotic-resistant public health pathogens. As development continues, TP-271 is anticipated to protect against certain biothreats agents, including Francisella tularensis, which causes tularemia; Yersinia pestis, which causes bubonic plague; Bacillus anthracis, which causes anthrax disease; and bacterial pathogens associated with community-acquired bacterial pneumonia (CABP), a significant public health threat and commercial market opportunity.

Tetraphase will be developing TP-271 with the financial assistance of the National Institutes of Health's (NIH) National Institute of Allergy and Infectious Diseases (NIAID), which awarded a $36 million contract in October 2011 to support TP-271′s development, manufacturing, and clinical activities, from which Tetraphase may receive up to approximately $13 million in funding.

We feel Tetraphase has been flying too far under the radar, and investors should be aware of the potential opportunity with it. As all small cap biotechs go, there is always substantial risk with investing in them. However, Tetraphase is well financed and has an abundant of cash on hand to last for years at its current burn rate.

Balance Sheet

Total Cash (mrq):

78.16M

Total Cash Per Share (mrq):

3.78

Total Debt (mrq):

13.79M

Total Debt/Equity (mrq):

22.02

Current Ratio (mrq):

8.83

Book Value Per Share (mrq):

3.15

The company burns a little over $3M a quarter, providing itself plenty of liquidity moving forward into the next 20 quarters, so dilutive raises are not very likely here

Shares Outstanding:

20.67M

Float:

7.95M

% Held by Insiders:

27.27%

% Held by Institutions:

13.10%

Insiders actually own more shares then the stats show. It's a good sign to see insiders bullish on their own company.

Conclusion:

Tetraphase is a strong speculative investment, considering the GAIN act and the recent Acquisition of Trius, we feel it's a good chance Tetraphase could be acquired for a price around $12 to $14 a share, based on its current Market Cap of $170.54M

Disclosure: I am long TTPH. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky -- always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.

 Mr.Matusow holds a position in the company featured in this article.




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