The Long Game For Trius Therapeutics

| About: Merck & (MRK)

Trius Therapeutics (TSRX) is in late stage clinical development of a new antibiotic, tedizolid, for treatment of MRSA infections. As noted in multiple articles and medical publications, MRSA infections have been on a significant upswing, even considered epidemic levels, in both the hospital and medical community. Big pharma's abandonment of drug development for MRSA - due to limited returns from large R&D investment - has created a problem for patients and the medical community, but also created a window of opportunity for small biotech and biopharmaceutical firms.

Tedizolid, shows promise for treating MRSA infections, and could potentially be a significant and highly important antibiotic for treating MRSA for years to come. Trius looks undervalued, given that it is in the driver seat going down the path of an important drug development. The path is not a cakewalk though, as with all new (NYSE:IND) investigational drug development. Hurdles along the way include the outcome of the second phase 3 trial. Many biopharmaceuticals get to a tipping point aka phase 3, but then cannot overcome new developments from the trial, or worse yet, cannot keep funding coming in while such issues occur. Outcome reports are expected in early 2013, only 7-8 months away if all goes well with execution. That is a notable catalyst event, although not a guarantee. Safety and efficacy were demonstrated in the first phase 3 trial prior.

Next along the pathway would be the FDA approval process. There are technical issues to overcome, and perhaps more hurdles from trial results, possibly non-clinical tasks, GMP manufacturing processes, etc. NDA's (New Drug Applications) sometimes get caught up in delays with additional FDA inquiries, procedures, and requests for more information, but these are all part of the safety process and effectiveness of the FDA itself. Sometimes, these events can cause delays of 1-2 years, again, that type of derailment needs to be managed correctly, efficiently, and cost effectively by management. All firms go down this pathway and must have the operational capital to keep the lights on during the process. True revenue streams in an operational company help. Trius has just that and has demonstrated it with prior financial statements and disclosures. With an early 2013 clinical trial dataset available, a 2014 - late 2015 time frame is possible.

Revenue Driver

Commercialization in the U.S. would be a major revenue driver as the MRSA problem is likely to do nothing but grow over the next decade. Europe, where the problem is also prevalent, will also be lucrative. Some analysts are projecting revenue in the U.S. market alone of nearly 40 million for the first year of launch, (which again may be 2014-2015), and growth to over 125 million in subsequent years if all goes well. Europe and international sales could be equivalent, if all roads to this pathway are clear.

Good basis and Competition

Trius already has demonstrated that it is in the same league as some of the big pharma entities. Its deal with Bayer last year for the licensing of tedizolid for all other countries of the world - with an upfront payment of $25 million - is indicative of the seriousness of this product. Additional payments tied to performance are slated as well.

There are other drugs approved for MRSA that include Pfizer's (NYSE:PFE) Zyvox, Cubist's (CBST) Cubicin, Forest Laboratories' (NYSE:FRX) Teflaro, and a generic vancomycin, which has become the favorite since its introduction in 1958. Theravance's (THRX) Vibativ also is in the game. While these players represent competition, the growing market can support multiple players.

However, a behind the curtain type challenge could be that one or more of these firms pull ahead with their product at a significant pace, one that outpaces Trius. Pfizer has deep pockets. It is somewhat of a coincidence that while big pharma's abandonment of this market has been a big factor in the nature of the problem in treating MRSA, Pfizer is in this game still.

With each clinical trial release, each milestone with Bayer met, each new partnering deal occurring within the U.S. and abroad, catalysts exists. With these catalysts comes the potential for opportunity. This is clearly a long game and Trius appears to be poised to play it, and well.

Trius is currently trading at $5.11 with a 52 week range of 4.71 - 9.00, and a market cap of 197.61M.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.