Seeking Alpha
Profile| Send Message| ()  

We have maintained a Neutral rating on Optimer Pharmaceuticals, Inc. (OPTR) with a target price of $12.00 per share. We find the FDA's approval of Optimer’s first drug, antibiotic Dificid, for the treatment of clostridium difficile-associated diarrhea (CDAD), highly encouraging.

CDAD is the most common nosocomial or hospital-acquired diarrhea and is a significant malaise in hospitals and nursing home facilities. Dificid (twice daily tablets) is the first drug to be approved in almost 30 years for the treatment of CDAD. Dificid is the only drug which has shown superiority over ViroPharma’s (VPHM) -- the only other FDA approved antibiotic for the treatment of clostridium difficile infection -- in sustaining clinical response for CDAD.

The superior recurring benefits of Dificid over Vancocin will be included in the label, which we believe is of great importance for Dificid sales as they provide a clear differentiation from existing options.

Astellas Pharma (OTCPK:ALPMF) will commercialize Dificid in Europe and certain other countries in the Middle East, Africa and Commonwealth of Independent States. Optimer holds the rights to Dificid elsewhere. We believe Astellas is an ideal partner for Optimer in Europe because of prior experience in commercializing anti-infective drugs like Mycamine, Avelox and Vivotif.

Optimer has an exclusive two-year agreement with Cubist Pharmaceuticals (CBST) to co-promote Dificid in the US. Optimer plans to market the drug to physicians, hospitals, long-term care facilities and other healthcare institutions with the help of Cubist’s existing US hospital sales force and medical affairs team experienced in marketing Cubist’s lead antibiotic Cubicin for the treatment of complicated skin infections. We expect the deals with Astellas and Cubist to maximize the impact of the commercial launch of Dificid.

On the flip side, however, we are concerned about the competitive scenario. On its launch, Dificid will have to compete with both big pharmaceutical companies as well as smaller biotechnology companies that are researching and selling products designed to treat infectious diseases.

Several pharmaceutical and biotechnology companies have already established themselves in the market for the treatment of CDAD and/or infectious diarrhea and many additional companies are currently developing products for the treatment of these indications which will compete with Dificid and Optimer’s another late stage pipeline antibiotic Pruvel. The market includes players like Pfizer (PFE),Bayer Schering (OTCPK:BAYRY), Johnson & Johnson (JNJ), ViroPharma and Salix Pharmaceuticals (SLXP).

We are particularly concerned about the presence of generics in the market. Generic antibiotic therapies are typically sold at prices lower than branded antibiotics and are generally preferred by managed care providers of health services. We are also concerned about the uncertainty surrounding the regulatory filing for Pruvel. We therefore prefer to remain on the sidelines until we gain visibility on the performance of Dificid in the market.

Source: Optimer Pharmaceuticals' Encouraging FDA News