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San Diego-based Optimer Pharmaceuticals (NASDAQ:OPTR) has spent more than $200 million and a dozen years of effort to get to the point where it can ask the FDA to clear its first product for sale on the U.S. market. The company has received little praise from the biotech crowds that usually scour the industry for hidden gems, yet this may soon change as it nears its 4/5/11 meeting with the FDA advisory panel which many experts agree will be highly positive, due to its efficacy. The flagship product, Fidaxomicin, which has IP protection until 2026, is tapping into a $7B industry which has increased significantly in recent years in both North America and Europe, with little-to-no competition.

Unlike many biotech companies, Optimer maintains a healthy balance sheet, which has roughly $192M cash on hand, no major debt financing, and it recently signed a $224M deal for partnership in Europe. Deals prior to PDUFA are a rarity, and many analysts view this as a positive development for the FDA outcome, and thus led to many analysts raising their price per share forecasts to well beyond $16 near-term.

Clostridium difficile infection [CDI], commonly referred to as c-diff, is a bacterial infection in the lining of the gut that can cause diarrhea, colitis and in some cases, death. When the bacterium grows and multiplies, it releases toxins in the gut. CDI is a particular risk following treatment with broad-spectrum antibiotics, which can kill healthy bacteria in the gut that keep the dangerous clostridium difficile bacterium in check.

C. diff rates have steadily risen over the past decade and the CDC estimates that more than 700,000 C. diff infections occur in the U.S. each year. Projected estimates for CDI in the U.S. have reached more than 700,000 cases per year. The infection strikes with particular intensity against the world’s rapidly growing elderly population in fact, two-thirds of CDI patients are 65 or older.

Excellent Clinical Trial Results

Optimer completed two fidaxomicin Phase 3 trials which showed that fidaxomicin achieved the primary endpoint of clinical cure and demonstrated a significantly lower recurrence rate and significantly higher global cure rate (defined as cure with no recurrence within four weeks of completing therapy) compared to Vancocin, the only FDA-approved antibiotic for the treatment of CDI. In the two Phase 3 trials, among subjects who had experienced a prior CDI episode and recurred within three months of entering the study, treatment with fidaxomicin resulted in a 47% reduction in repeat CDI recurrence compared to Vancocin (p=0.045). The data also indicated that treatment with fidaxomicin significantly improved the recurrence rate and global cure rate in CDI patients requiring concomitant antibiotics compared to Vancocin.

Reduction in CDI recurrence is highly important and advantageous, as studies suggest that each case of CDI recurrence results in $10,000-$34,000 in additional cost to healthcare and that treatment with fidaxomicin would lower that burden by $2,000-$6,000 per patient. Polls also showed that 32% of doctors would make fidaxomicin their first-line therapy for CDI, while 52% would make it their second-line choice.

Fidaxomicin vs. Vancocin

  • Similarly high cure rates: The clinical cure rates between fidaxomicin and vancomycin were similar,
    with slightly better results from fidaxomicin.
  • Statistically Significant in Reducing Recurrences: Fidaxomicin significantly reduced the risk of
    recurrence among CDI patients.
  • Substantial Improvement in Global Cure Rates: Compared to the current treatment, fidaxomicin
    demonstrated a statistically significant higher global cure rate, defined as curing the patient at the end
    of treatment without recurrence.

The following table outlines top-line data from two Phase 3 clinical trials of fidaxomicin that together enrolled 1,164 patients in the U.S., Canada and Europe. Fidaxomicin was well tolerated in both studies. Information courtesy of Optimer’s fact sheet.

Should the FDA clear this new therapy for sale, it would become Optimer’s first marketed product and the first new therapy for this dangerous hospital-based infection in about 25 years. This makes its potential market value highly comparable to that of Clinical Data’s (NASDAQ:CLDA) Viibryd, first approved treatment major depressive disorder [MDD] in over 15 years, and Human Genome Sciences (NASDAQ:HGSI), whose treatment for lupus is the first in 50 years. Human Genome Sciences went on to gain from $2.82 to $27 a share on approval, while Clinical Data went on to be bought out for $30 a share, nearly a 100% increase from its pre-approval price per share.

Analyst Recommendations

Highly positive clinical trial results, major deal for EU, has resulted in many upgrades during the past year from renowned firms:

  • 2/7 – Jefferies maintains buy, price target of $17.00.
  • 2/7 – Ladenburg Thalmann maintains buy, price target raised to $14.00 (from $13.00).
  • 2/7 – Needham & Co. maintains buy, price target of $19.00.
  • 2/7 – Canaccord Genuity maintains buy, price target of $18.00.
  • 2/7 – Oppenheimer & Co. maintains outperform, price target of $14.00.
  • 2/3 – ThinkEquity maintains buy, price target of $18.00.
  • 2/3 – JMP Securities maintains market outperform, price target of $16.00.
  • 1/13 – Robert W. Baird maintains outperform, price target of $14.00.

Highly Experienced Leadership

An often highly important and overlooked aspect for biotech companies is the past experience of the man at the helm, or the CEO. Optimer’s Pedro Lichtinger has more than one can ask for, after a long career at Pfizer, where he was the president of the company’s primary care business. His experience is in commercialization, which happens to be exactly the phase of the game that Optimer is just now about to enter. “When I was getting started at Pfizer, all the managers who joined when they were younger had a dream to bring to the market highly effective products that will benefit patients. That dream has stayed with me,” says Pedro Lichtinger, Optimer’s CEO. “When I retired from Pfizer, what I saw in Optimer was an opportunity to make a major advancement in medicine, that was at the same time cost-effective and would do a lot of good for thousands of patients.”

You may view a recent CNBC interview with Mr. Lichtinger here, where he discusses the company’s IP protection, product advantages, fda approval and marketability.

Technical Analysis

From a technical standpoint, the stock is currently interlocked in a highly bullish Ascending Triangle pattern on the apex of a breakout. Volume seems to have dried up, which is indicative of its formation of lower lows and similar highs, often a byproduct of institutional and mutual fund accumulation prior to strong moves upward. The measured move would take it up to $14, and is comparable to the breakout from its previous Ascending Triangle experienced on December, 13, 2010.

Relative Strength Index [RSI] has also entered a similar pattern, and looks to move higher as money begins flowing into the equity. Both Full stochastic and MACD divergence have bullish crosses, further paving the way for positive gains. The 4/5/11 FDA advisory panel meeting should provide the necessary catalyst to break the stock out of this pattern.


Disclosure: I am long OPTR.

Source: Optimer's Blockbuster CDI Treatment: A First in 25 Years