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Durata Therapeutics (NASDAQ:DRTX) is developing Dalbavancin, a once a week, intravenous antibiotic product candidate, for the treatment of patients with acute bacterial skin and skin structure infections, or ABSSSI.

Dalbavancin has many advantages which is outlined below by 150 physicians comparing it to other broad spectrum antibiotics:

source:JMP Securities Healthcare Conference

Dalbavancin used to belong to Pfizer (NYSE:PFE), but was bought by Durata in 2009. Dalbavancin prolonged development, did not fit into Pfizer's strategic planning.

Pfizer's CRL (Complete Response Letter) on Dalbavancin:

"The FDA recently published a draft guidance on studies designed to show non-inferiority as a basis for approval of antibacterial drug products and has requested that Pfizer provide additional data with regard to dalbavancin. Pfizer is working with the FDA to respond to these new requirements. "

In other words, the main reason the FDA decided to give the company a CRL was because the FDA changed its guidance on non-inferiority trials, which was not in place when the previous Dalbavancin trials were designed. So, the FDA was asking for several new trials to prove non-inferiority, Pfizer gave up on it, and sold it.

Dalbavancin previously completed three other Phase 3 clinical trials in May and June 2004 pursuant to prior FDA guidelines that are no longer in effect, in which more than 1,000 patients in total received dalbavancin. The drug achieved its primary efficacy endpoint in evaluable clinical response at test of cure in each of these three completed Phase 3 clinical trials when compared to Linezolid, Cefazolin or Vancomycin, three of the standard-of-care agents for uncomplicated skin and skin structure infections, or uSSSI, and complicated skin and skin structure infections, or cSSSI.

Financials

As of 9/30/13, DRTX reported cash and equivalents of $66 million. On November 6th/13, the company announced a financing agreement with PDL Biopharma. Under the credit agreement, PDL will provide Durata with up to $70 million of debt financing with a five year term and will receive interest on the principal amount outstanding and a security interest in substantially all of Durata's assets. A breakdown of $15 million of funding upon U.S. regulatory approval of Dalbavancin, and the remaining $30 million funded within nine months after regulatory approval of dalbavancin, at Durata's election.

DRTX has sufficient cash and funding to provide more than enough cash for operations through the potential commercial launch of Dalbavancin.

Analyst opinions

Wedbush made some very bullish statements:

Wedbush initiates coverage on Durata Therapeutics (NASDAQ: [DRTX]) with an Outperform. PT $20.00.

Analyst, Gregory R. Wade, said, "Durata's potent IV once-weekly gram-positive dalbavancin will, we believe, garner meaningful market share in patients with serious skin and skin structure infections (abSSSI) and osteomyelitis, a serious and growing, difficult-to-treat infection that requires multiple weeks of antibiotic therapy...We believe Dalbavancin is significantly risk-reduced having already successfully achieved non-inferiority in 3 Phase III clinical trials and completed a substantive review of an NDA at FDA...We believe dalbavancin, with similar potency to CUBICIN (Nasdaq: CBST), augmented by a convenient once-weekly administration schedule will further grow this segment of the marketplace."

Conclusion

U.S. hospitals treat 18 million patients annually for infections. ABSSSI account for 17% of these infection or 3.3 million patients. A round of Treatment with Dalbavancin costs around $2,500. If Durata could harness 10% of the market share (which is very possible with the convenience of a powerful once a week antibiotic) that would equal to 825 million in revenue.

Durata has 26,636,639 shares outstanding at a price per share of $12.37, giving a market capitalization of 330 million. (which is ridiculous considering the vast potential in the market they are entering).

I am giving Durata Pharmaceuticals a price per share target of $22.00 per share (giving the company market cap of around 480 million). I believe it will capture a large enough market share to warrant this share price. I also believe the company is a strong takeover target for other big player pharmaceutical companies looking to bolster their antibiotic pipeline. Comparing the buyout price of Trius (TSRX). I would expect a takeout price of $23-25 per share giving the company a 650 million market cap.

Catalysts

-Advisory Panel meeting scheduled for 3/31/14 as per the Federal Registry which was registered 2 days ago.

-PDUFA decision goal date of May 26/14 under 8 month priority review.

Source: Durata Therapeutics: Primed For Big Gains With March Advisory Committee Date Announced