Loss Widens at Optimer

Optimer Pharma’s (NASDAQ:OPTR) fourth quarter 2010 loss of 31 cents per share exceeded the year-ago loss of 28 cents per share. The Zacks Consensus Estimate was 33 cents. The wider loss was seen on the back of increased costs incurred for pre-launch marketing efforts for its antibiotic, fidaxomicin.

Optimer does not have any marketed products at present. It earns revenues primarily from research grants and collaborative agreements. Revenues were $0.15 million versus $0.21 million in the prior-year quarter.

Operating expenses during the quarter climbed 28.5% to $12.6 million. Marketing expenses surged 928% to $2.0 million in the quarter. The sharp rise was primarily attributable to increased market research and pre-launch commercialization activities in relation to the fidaxomicin program.

R&D expenses declined 9.2% to $6.9 million in the reported quarter. The decrease was primarily attributable to the lower clinical trial expenses incurred during the quarter. We believe that investor focus is currently more on development of the company’s pipeline rather than the financials.

Optimer’s most important pipeline candidate is fidaxomicin which is an antibiotic for the treatment of clostridium difficile infection (CDI), the most common nosocomial or hospital-acquired diarrhea. Fidaxomicin is currently under US Food and Drug Administration (FDA) review with a decision expected in May 2011 (target date: May 30, 2011).

Optimer’s New Drug Application (NDA) has been accepted by the FDA and has been granted a six month priority review. A FDA panel will discuss the NDA on April 5, 2011. Optimer hopes to launch fidaxomicin by the second half of this year if it receives approval in May 2011. Optimer has also filed a Marketing Authorization Application (MAA) with European Medicines Agency (EMA).

Optimer Pharmaceuticals entered into an exclusive collaboration and license agreement with Astellas Pharma Europe Ltd. in February 2011 for the development and commercialization of fidaxomicin in Europe and certain other countries in the Middle East, Africa and Commonwealth of Independent States (CIS).

It received an upfront payment of $69.2 million and can receive upto $115 million Euros as regulatory and commercial milestones and high-teens to low-20% royalties.

Optimer’s another pipeline candidate is Pruvel (prulifloxacin) for the treatment of travelers’ diarrhea. Optimer intends to file an NDA for the candidate soon.

2010 Results

Full year 2010 loss of $1.25 per share was below the year ago loss of $1.30 and Zacks Consensus Estimate of $1.33. Revenues were $1.5 million versus $0.89 million in the prior year. Optimer intends to provide 2011 guidance after the FDA advisory meeting.

Our Recommendation

Currently, we have a Neutral recommendation on Optimer, which is supported by a Zacks #3 Rank (short-term Hold rating). Optimer has limited sources of revenue and largely depends on the success of its lead pipeline candidates, fidaxomicin and Pruvel.

We believe fidaxomicin could receive a positive recommendation from the FDA panel based on its safety and efficacy data. Although we are optimistic about the prospect of both fidaxomicin and Pruvel in terms of their clinical trial results and FDA approval, we are also quite aware of competition in this area. We believe the initial sales ramp could be slow.