Today the company announced the pricing of an underwritten public offering of 6,300,000 shares of its common stock at $4.75 per share with projected gross proceeds to be approximately $29,925,000 million before deducting underwriting expenses. Prior to the announcement of the offering, Trius was trading at the mid-$5.50 range.
Here are some good reasons why there is a keen interest in this biotech firm:
Big Pharmaceutical firms are expressing a renewed interest in the antibiotics market after withdrawing from primary development over the past 10 plus years. A combination of shortening of patent IP lengths, the entry of generics which has reduced their ability to recoup investment, along with shareholder pressure to return a blockbuster for high R&D investment has led the path away from the antibiotic market. Changing in the wind for the past 3-4 years has been that small biopharma's have picked up the slack on development and have fostered multiple drugs through the "valley of death," aka Pre-Clinical Development Phase I and II trial periods. Only when firms appear to be on the cusp of a Phase III, and imminent FDA approval, has big pharma latched on with shared development costs and partnerships. Some have partnered early with small biotechs as well to fund development costs in exchange for great marketing deals. Trius is in such a place with the second Phase III trial of tedizolid. Topline results are expected to be reported in the first quarter of 2013 with anticipated introduction in 2014.
When milestones get this close, marketing and licensing deals are alongside or not far behind. European deals are likely with Trius's tedizolid. These often are front loaded with million dollar payments in the likes of $50-$100 million, again attractive to big pharma in search of a deal.
When getting this close, big pharma starts getting acquisition minded but they look for stable firms, good IP protection, and promising drugs with solid revenue streams. Something they can sink millions into with marketing; Trius may fit this bill.
Another factor is the GAIN Act (Generating Antibiotics Incentives Now Act) which took effect in October 2012. This legislation was derived to spur development of new antibiotics via stream-lining of regulatory processes for commercialization. This has the window wide open for new development of antibiotic drugs and sends an encouraging sign to developers, of course big pharma included. In the end, this nets out to be more reasonable clinical trial procedures, less costs, and faster turnaround time. It is enough, along with other factors, to get them back in the game and the quickest path to that is via bolstering their presence with the acquisition of a product or company already far down the pathway.
The root of the problem is that the current antibiotic go-to meds are not working and are less effective than in the past. A very significant and apparent need is present for new antibiotics to treat serious drug-resistant gram-positive infections. At the height of the problem is drug-resistant gram-positive bacterium in hospitals and patient community in the form of methicillin-resistant Staphylococcus Aureus or MRSA. The market appears to be wide open for MRSA related antibiotics. Trius has been early in with the development of tedizolid and is well positioned to garner a strong revenue stream with or without a big pharma deal; although it is expected that a marketing and licensing deal will be part of the mix.
Currently trading at $4.78 the company's Market Cap is about $200 million. Seeming low for a firm with significant catalyst opportunities in the waiting. Smallcapcity.com plans to interview CEO Jeff Stein about company's future in late January and specifically discuss the acquisition issue.
Online publication smallcapcity.com plans to interview CEO Jeff Stein about the company's future in late January and specifically discuss the acquisition issue.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.