Entering text into the input field will update the search result below

Paratek Pharmaceuticals: The Realistic Case For Omadacycline


  • Omadacycline has considerable medical advantage over linezolid.
  • It will almost certainly be approved this year in ABSSSI and in CABP.
  • The question is, how much pricing power will it have given the price of generic zyvox.

Paratek Pharmaceuticals (NASDAQ:PRTK) has a lot going for it in 2018 with two NDAs, phase 3 trial results and so on…and yet the stock is depressed and trading right near its 52-week and all time lows. Its next generation tetracycline antibiotic omadacycline has proven to be non-inferior in efficacy and superior in safety in ABSSSI to linezolid, the current standard of treatment in this indication. Omadacycline has both oral and IV formulations that are equivalent to one another, making it useful in both hospital and community settings. And yet the market does not seem to recognize the company’s strengths.

Why is that?

Despite a very high chance of approval after having met all relevant endpoints in its SPA-backed pivotal trial, it appears that the Market isn’t sure of omadacycline’s market potential. Linezolid, generic Zyvox from Pfizer, costs only about a hundred dollars (that’s a ballpark figure; there are many variations in IV and oral and strength; in India it costs about five bucks) and is very effective against ABSSSI despite everything we hear about antibacterial resistance. So Omadacycline’s pricing power is limited by Zyvox price.

Now, omadacycline has the following advantages over linezolid (source: summarized by an excellent comment in an earlier SA article, some of the data verified by the author, for example bullet 3 is on page 26 of Corporate Presentation linked below):

“1) Once daily oral vs twice daily oral

2) More effective – higher clinical success rates for both the mITT and CE-PTE populations (96.3% vs 93.5% clinical success rates in the P3 trial for the clinically evaluable population)

3) Broader – potentially more effective against some ABSSI pathogens than Zyvox, based on the P3 study

4) No known resistance mechanisms vs multiple for Zyvox

5) Fewer serious TEAEs: less serious nausea and diarrhea, limited impact on liver function”

This article was written by

Avisol Capital Partners profile picture

Avisol Capital Partners is made up of a team of medical experts, finance professionals and techies, all of whom invest their own money in the picks they share. They aim to help readers find the middle ground between value and growth investing, as they demystify the biopharma industry.

They lead the investing group Total Pharma Tracker where they offer a monthly updated catalyst database, an investability scoring system for quick reference ideas, and direct access in chat for dialogue and questions. Learn more.

Analyst’s Disclosure: I/we 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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (36)

Kevin Porter profile picture
PRTK Target at least $25, follow my instablogs for realtime picks
Retired_Oilman profile picture
Kevin Porter: Your PT of "at least $25" is based on what? Your personal opinion?
Kevin Porter profile picture
Yes my personal opinion, based on more than 20 years of daily professional trading
Retired_Oilman profile picture
Oh, yeah? Well, I've been in the market since 1982 and have found that biotech and drug microcaps are NEVER easy to value, except in 20/20 hindsight! LOL

BTW -- I would say that unless PRTK fails in the approval process, $25 should be an easy target to hit.
Retired_Oilman profile picture
There’s some good commentary in this thread. I especially like to hear comments from the medical community -- those who would be directly involved in prescribing these antibiotics. It seems like a few of the skeptics still believe that PRTK is a “buy” at the current price.

Three things I can’t figure out…

1) What is the real potential TAM and ultimate pricing for omadacycline and do the estimated revenues justify a large premium in a takeover?

2) I don’t understand the thinking of the management team. At this stage of drug development, most microcap biotech companies would seek out a buyer or at least a partner to help in the drug rollout and distribution. These guys seem intent on bringing their antibiotics to market on their own.

3) Why is the market pricing PRTK so low when all the sell-side analysts have very high price targets for the stock (average PT = $39+)? One broker recently raised the PT to $55. I’ve NEVER seen a PT that was 4 times the current SP of any stock!! Either “the market” is wrong or the brokers are wrong. I suppose time will tell.

Any thoughts on these points?

Disclosure: I’m a recent PRTK investor, average @ $16.20.
Early Retiree profile picture
forget the sell-side. Have you seen their models? They simply project x% of market share and then extrapolate. But if share was not 1.2% but 0.9%, everything would change.
Fun fact: after Louise Chen had left Guggenheim for Cantor, her price targets increased. Hmm.
I have done a lot of modeling on PRTK myself and if you project uptake to be fast or slow makes a huge difference on capital needs, dilution etc. - even if peak sales remain the same in all your models. It's tricky.
Models can only help you identify sensitivities, but it's almost stupid to use them to justify price targets.
Retired_Oilman profile picture
Early Retiree: So what is YOUR personal price target for PRTK and the timeframe? And do you anticipate a buyout or at least a partnership with a large pharma company down the road?
Retired_Oilman profile picture
I should have added that I also find it a conundrum that, except for a brief dip in 2016, PRTK is now trading the lowest since Baupost Group and Abingworth funded the merger to create the company back in 2014. Of course, then it was just wishing and hoping but today they are very near approval for their antibiotic.

It looks like both firms are underwater with the stock now after holding nearly 3 ½ years. Even if the stock doubles from here, that's a poor return in light of the risk taken.

I’ve followed Seth Klarman into several stocks over the years with good results. However, it appears that his biotech team has a mixed record with their picks.
@Early Retiree: I will say, with the caveat that antibiotic sensitivities are different depending on your geographic area (or even which hospital system within a geographic area), but linezolid is probably 4th line for MRSA SSTI for nearly every clinician, especially in primary care (IM and FM), who are the most common to treat these infections outside of the hospital.

In nearly a decade of practice, I've only used Linezolid INSIDE the hospital, after getting a consult from Infectious Diseases. I've never once used it for MRSA skin infection as an outpatient. Bactrim, Clinda, and Doxy are the 1-3 (not necessarily in that order). I've never had a patient whose cellulitis wasn't cured with one of those three if I decided to treat as an outpatient.

I agree that the side effect profiles of those three meds aren't great, but they are generally cheap and for the most part well-tolerated.
Agamemnus profile picture
Baxdela :)
sspencer profile picture
I appreciate your article, but find that you have left some major gaps in the potential for PRTK. You did explore the market potential for O to treat ABSSSI, but offer no stats on potential for O to treat CAPB and /or UTI. What is the market size and potential PRTK rev for these indications??
@sspencer: See my post above in response to Early Retiree. Very few, if any, clinicians who primary treat UTI (ObGyn, Family Medicine, and Internal Medicine), are going to use O for UTI with so many reasonable and cheap alternatives.

I'm long PRTK because I think that ultimately there will be a market for it, but I think it will require serious pricing reductions, which likely won't come for years after it's launch. The "usual suspects" for antibiotics used for both UTI and SSTI are so old/familiar/common that they are going to be hard to push out. I just don't think the market is as big as PRTK and some commenters are making it out to be.
Avisol Capital Partners profile picture
Good insight here, uncmed.
Compelling Opportunities profile picture
Funny how providers had the same type of opinion about Qvar and it became a nice seller. I'm glad providers aren't salesmen. No offense of course.
I will buy this stock on the Nabriva data release. Good or bad.
I agree that pricing is a big factor for Omadacycline's sucess since Zyvox patent expires in 2021. I personally don't believe that 2 years is long enough for a new product launch. On the other hand, all sales projection potential have been around the US market. This new drug has a global market sales potential. I read an article that global antibiotic sales will reach $ 55 Billion a year. Paratek will need to partner with a big pharma or sell itself to a big pharma in order to reach the global market. So, I am staying confident on Omadacycline's future potential.
Early Retiree,
did not no about the linezolid and SSRI god only knows how many people are on that stuff
Early Retiree profile picture
About 15% in the U.S. - unfortunately.
the bad thing about the SSRI once you start you can never stop
@Badadvise 1: Not true at all. For those on SSRIs for anxiety or anxiety related diagnoses, often times it is difficult to stop and still have control of anxiety.

Conversely, those on it for depression can more often than not come off after 9 months and be fine between episodes of major depression. For other indications, it is completely variable.
Zyvox is not used for CAP.
Agreed. I believe the author lays out a very reasonable bearish case for Paratek were treatment of MRSA the only focus for O; CAP for a really sick patient who hits the ER septic would be a much more logical and likely role, with early conversion to an oral form and earlier discharge additional carrots.
Add in the use in UTIs, especially given its efficacy in ESBL Gm negative infections, and a reasonably compelling case can be made for owning the stock.
FWIW, I appreciate the "bearish" angle the author has taken, I would much rather read something that challenges my assumptions for owning a stock, and reiterates the risks involved.

I am long PRTK but haven't bet the farm on it.
Avisol Capital Partners profile picture
I actually checked zyvox label to make sure this was correct. Zyvox injection is indicated for CAP, see here page 11 line 352- http://bit.ly/2Gez5eC
Sorry, I should have been clearer.
Zyvox can be used for CAP, but wouldn't be likely initial monotherapy for a patient ill enough to be hospitalized-which is really the target for O.
But your point is taken, for proven Gm+ pneumonias, Zyvox would be totally appropriate.
I like this company because everyone knows PRTK has Allergan’s personal phone number. So making a buyout deal is easily within reach.
its a very good buy. i think it could be worth 30 to 50 a share. depending on if they could do 300 million us sales. and sell ex us rights with a tier percentage of royalties. worth 1 to 1.5 billion in my opinion
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.