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Trius Therapeutics (TSRX) is a recent stock that our investment group has been buying. Our last buy was Sarepta Therapeutics (NASDAQ:SRPT) which is up 10% in the last 2 weeks. Biggest winners include Map Pharmaceuticals (which was eventually bought out by Allergan Inc. (NYSE:AGN) and Acadia Pharmaceuticals (NASDAQ:ACAD) which has risen 250% since our last report that can be read here.

This article will explain the bullish scenario for TSRX, both technically and fundamentally. We believe the company has big potential into 2013 and the future. The share price has been consolidating recently but we expect a big move coming in the next few weeks.

The company

TSRX is a biopharmaceutical company focused on the discovery, development and commercialization of innovative antibiotics for life-threatening infections. Novel therapeutics are always needed as bacterial resistance continues to be on the rise. Serious infections are becoming more difficult to treat causing further problems and complications. This is where TSRX comes in.

The story

TSRX produces a drug known as Torezolid, now commonly known as Tedizolid. This is an oxazolidinone drug that is used for complicated skin and skin-structure infections, including those caused by Methicillin-resistant Staphylococcus aureus (MRSA) infections. The prodrug is known as TR-701.

What is interesting is that there is only one drug that is currently approved by the FDA to combat these infections. This drug, known as Linezolid and marketed by Pfizer (NYSE:PFE) is active against streptococci, vancomycin-resistant enterococci and MRSA. Linezolid is the leading antibiotic currently, with sales of $1.35 billion in 2012. Side-effects of the drug include diarrhea (3-11% of clinical participants), headache (1-11%), nausea 3-10%, rash (2%), constipation (2%) and altered taste perception. Bone marrow suppression has been cited in long term use. Other side-effects include neuropathies, both peripheral and optic.

Pipeline

The picture below shows the current pipeline currently under process. Have a look here for more detailed information.


(Click to enlarge)

Current studies

Tedizolid is an IV and orally administered drug. It has been designed for improved potency, resistance, and spectrum of activity. The latest Phase 3 results were very positive.

Jeffrey Stein PhD, The CEO of TSRX stated recently:

"There has been a significant need for new antibiotic therapies targeting resistant bacterial infections, such as MSRA." He continues by saying "Results show that tedizolid phosphate represents a potential new therapy to treat severe skin infections with a once daily IV infusion or pill in fewer days than existing antibiotic medications."

The full study of the latest Phase III result can be read here. Both the IV and oral medication were tolerated well.

Fundamental analysis

The company is currently valued at around $396m. It has $83m cash in hand with 0 debt. The float is low at 37m shares. 28% of the float is owned by insiders. Interestingly, a high percentage of the float, currently around 10% is short. This bodes well for a short squeeze that can take the stock to new highs. There hasn't been any major selling from insiders which is bullish going forward.

Technical analysis


(Click to enlarge)

The future

I expect big things for TSRX into 2013 and 2014. I expect that TSRX will file for an NDA (New Drug Application) shortly and possibly a partnership in the coming months. Some bulls keep calling for a buyout. The trend in the stock is up. We own January 2014 calls and will be adding to our position over new highs.

Source: Bullish Stock For 2013: Trius Therapeutics