Durata (DRTX) Is A Strong Buy Here

Durata has completed phase II and phase III studies on an exceptional antibiotic, dalbavancin. This agent will be considered by an FDA AdCom at the end of March 2014 and appears on track to be recommended for approval. Dalbavancin is likely to be deemed exceptional in ways not yet priced into DRTX.

This antibiotic has exceptional pharmacokinetics. It is given iv but requires only once-weekly administration. Dalbavancin has excellent activity against gram positives that cause cellulitis, certain pneumonias and osteomyelitis.

The advent of dalbavancin could lead to a minor sea change in medical practice and will likely be embraced by payers for one reason: it prevents hospitalization. Clinicians like me often panic with certain bacterial infections clinically (e.g., cellulitis in a diabetic patient) and plonk those patients in hospital to give round the clock in antibiotics. Now we can infuse a drug in the office, send the patient out and see them again in 5 days. The advent of dalbavancin will also obviate many situations in which home-health nurses muse infuse daily antibiotics, which is less costly than inpatient care but still costly.

Detractors will whine and say that antibiotics are not blockbusters. Yet it is on the basis of one antibiotic, daptomycin, that Cubist has become a multi-billion dollar company. Dalbavancin will be more convenient than daptomycin and just as effective.

DRTX does not yet have a product to market. An approval will be a transformative event for the company, which is now at market cap of about $300 million. To speculate, it may be an attractive takeover target.

One stealth source of appeal for dalbavancin is its activity against a serious bio-terror threat:

www.ncbi.nlm.nih.gov/pmc/articles/PMC2826002/

Disclosure: I am long DRTX, CBST.