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Many people are unaware that notwithstanding all the start-up, small-cap and megalith bio-pharmaceutical giants working around the clock to produce new treatments for diseases infectious and otherwise, there's nary one new antibiotic that comes to market in this country every year.

Hard to believe. But it's true. Between the half decade that encompassed 1983 and 1987, 16 new antibiotics were approved by the FDA - a blockbuster era in global medicinal development. Yet in the five-year period between 2008 and 2012, just two new antibiotic treatments were approved for general use.

Part of the reason for this apparent stall in pharmaceutical progress is the poignant fact that a greater number of infections are becoming drug resistant. That is, they're mutating at a rate faster than academic and commercial laboratories can develop antibodies to treat them. For every 'cure' that begins a course for commercial testing against these infections, there's simply a tremendously high fail rate.

The Few Who Succeed

Just a handful of small biotech companies are now at work attempting to address the shortfall in treatments for, among other things, new resistant strains of pneumonia and tuberculosis, one of which, Mycobacterium tuberculosis, for example, is now said to be dormant in one out of every three individuals on earth (!).

San Diego based Trius Therapeutics, Inc. (TSRX) is one of those companies. Well capitalized and apparently en route for a big score in this area, Trius established itself with the very lofty mission of "developing commercial treatments for life-threatening infections."

Indeed, the company's principal pipeline offering is tedizolid phosphate (TR-701), the only drug of its type to have completed a Phase III trial for the treatment of the stubborn MRSA staph infection for which no known cure currently exists.

What is MRSA?

MRSA starts with small pimple like bumps that quickly grow into large pus-filled boils that often rupture and spread via direct contact. Eventually the condition can affect vital organs and has led to the often lethal toxic shock syndrome and flesh-eating pneumonia.

The Trius Advantage

Needless to say, any treatment that is able to contain or roll back the negative effects of MRSA would be welcomed by the medical community and would certainly garner great attention and enthusiasm from the markets.

There are now four companies working to develop such a treatment (including Trius). They include global biopharm giant Pfizer Inc. (PFE) - whose product, Linezolid, produced worldwide sales in 2011 of $1.3 billion; Cubist Pharmaceuticals' (CBST) Daptomycin, which earned that company $700 million in revenue in the U.S. alone last year, and generic product Vancomycin, a naturally occurring antibiotic available since 1953, first developed by Eli Lilly (LLY), but now sold by a number of companies under different brand names.

Vancomycin was traditionally used to treat infections causing colitis, including a number of strains that now require more innovative products. With the advent of these more resistant bacterial forms, vancomycin has become less effective.

Trius's treatment possesses several distinct advantages over the competition.

  • First, it has proven itself faster acting, offering a shorter course therapy than all its rivals,
  • Second, it offers the option of transitioning patients from hospital-based intravenous treatment to an equal oral dosage regimen at home, a benefit not available to vancomycin and daptomycin patients,
  • Third, Trius's product actively treats a great number of lung infections associated with MRSA based infections,
  • Fourth, it is administered just once daily, unlike vancomycin and Pfizer's treatment, linezolid, and
  • Fifth, Trius's tedizolid provides more rapid in vivo bactericidal activity than the generic vancomycin and daptomycin, while Pfizer's product is not in vivo bactericidal at all.

Click to enlarge

The above chart offers a quick breakdown of the foregoing, but does not include these additional two non-clinically proven, but otherwise significant advantages:

  1. Tedizolid apparently has lower interaction potential with other treatments than its rivals, and
  2. is active against several bacterial strains that Pfizer's linezolid is not.

Global Partners and Financing

Tedizolid's clinical testing record and commercial potential, along with Trius's overall management and research expertise, have apparently not been lost on the largest multinational bio-pharmaceutical firms. Last July (2011), Bayer Pharma AG signed an exclusive deal with Trius for development and commercialization rights for tedizolid in Asia, Africa, the Middle East and Latin America. In return, Trius got $25 million in cash and a promise to cover roughly 25% of the drug's development costs going forward.

Trius is also eligible for another $69 million in cash from Bayer should the company meet certain development and regulatory milestones delineated by Bayer and has rights to royalties from sales in the above territories as well.

As for the lucrative (and no less infected) North American and European markets, Trius is entertaining offers from all the majors but has yet to strike a deal. With a market for its product currently valued at between $1.5 and $2.5 billion and growing rapidly, it's clearly in the company's interest to let time add sizzle to any potential deal.

For the other drugs in its pipeline, Trius benefits from the full support of two agencies, the National Institute of Allergy and Infectious Diseases (NIAID), a division of the National Institutes of Health (NIH) and the Defense Threat Reduction Agency (DTRA), part of the Department of Defense.

I say that with vancomycin currently accounting for over 70% of MRSA treatment and steadily losing its efficacy, Trius's tedizolid should rapidly make inroads and steal market share upon receiving regulatory approval. With Trius's shares currently sitting at $5.78, the company offers great upside.

Source: Trius Therapeutics: Treatment And Stock Undervalued