Significant market potential seen for Trius Therapeutics' phase III candidate Print E-mail
By Staff and Wire Reports   
Tuesday, 25 January 2011 13:23
best penny stock picksJason Napodano, CFA of Zacks investment research has initiated coverage of Trius Therapeutics (Nasdaq:TSRX) with an Outperform rating and $10 price target.

"We believe in the company’s phase III candidate, Torezolid, for acute bacterial skin and skin structure infections (ABSSSI) and methicillin-resistant Staphylococcus aureus (MRSA," writes Napodano. "We see Torezolid as having significant market potential based on a clear superior profile to the two market-leading products in Pfizer’s Zyvox (linezolid) and Cubist’s Cubicin (daptomycin). Torezolid offers rapid efficacy onset, convenient once-daily dosing, a short course of therapy, and powerful efficacy. Pfizer’s Zyvox will post worldwide sales over $1.1 billion in 2010 despite its limitations. We believe that Trius’ phase III program will prove that 6 once daily 200mg Torezolid pills are superior to 10 twice-daily (20 total) 600mg Zyvox pills.

"Once approved, we believe the market will rapidly convert to Trius’ Torezolid product. There is clear precedence that backs-up our belief. The market rapidly shifted from generic vancomycin to the more effective Zyvox a decade ago, and newer products such as Cubicin and Tygacil are gaining share on Zyvox now. Assuming FDA and EMEA approvals in 2015, we are modeling Torezolid worldwide sales of $750 million by 2020. Assuming Trius seeks to commercialize Torezolid in the U.S. on its own and partners in EU, we see net income in 2020 of $230 million, with EPS of $5.75. Based on our discounted cash flow (DCF) analysis, we see Trius fairly valued at market capitalization of roughly $250 to $275 million based on these projections."

"Finally, on a simple comparison to its peers, Trius looks vastly undervalued. The two closes competitors are Cubist Pharmaceuticals and Optimer Pharmaceuticals. Cubist has a market capitalization of nearly $900 million. Optimer has a market capitalization of nearly $450 million. We see Trius following down the same path as these two companies, only several years behind. The current market capitalization of Trius at just shy of $100 million significantly discounts the company's future potential.

"We have concluded that a market capitalization of $250 million is fair for Trius based on the potential best-in-class characteristics of Torezolid. This equates to a price target of $10 per share. Our rating is Outperform.

Jason's new report for Trius from Zaxks Investment Research is now available for download:

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