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Can Nabriva's Rally Continue?

|Includes: Nabriva Therapeutics (NBRV)

"The single most exciting thing you encounter in government is competence, because it's so rare." - Daniel Patrick Moynihan

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It is not too late. Join me at the DIY Investor Summit that is running all this week where I will share detailed tips on my core investment strategies, top advice for DIY investors, and specific ways I'm positioning my portfolio for 2017.

At the request of a real-time follower we will take a quick look today at Nabriva Therapeutics (NASDAQ:NBRV) which has been on a real roll recently. Can it continue?

Company Overview:

Nabriva Therapeutics is an Austrian based biotech concern that is focused on the development of anti-infective agents to treat infections in humans. Nabriva came public in late 2015 and until the stock's recent rally could have been termed a "Busted IPO" at the shares had dipped below recently after coming public at ~$10 a share. The stock currently is priced right around $8.00 a share and has a market capitalization of approximately $175 million.

Pipeline:

Lefamulin:

Nabriva is developing its lead product candidate, lefamulin, to be the first pleuromutilin antibiotic available for systemic administration in humans. Discovered over six decades ago, the company believes pleuromutilins have the potential to be developed as a new class of antibiotics for systemic administration in humans. Pleuromutilins inhibit bacterial growth by binding to a specific site on the bacterial ribosome that is responsible for bacterial protein synthesis.

Lefamulin is really Nabriva's only real compound to note although it is being targeted at several indications. What appears to triggered the recent rally, other positive analyst commentary is a disclosure from the company on December 20th. Nabriva announced "that it has achieved 60% of its enrollment target in the lefamulin evaluation against pneumonia {LEAP} 1 trial. LEAP 1 is a global, registrational Phase 3 clinical trial evaluating lefamulin in patients with moderate to severe community-acquired bacterial pneumonia (CABP). Based on current sample size estimates, the company expects to complete enrollment of 550 patients by the end of the second quarter of 2017.

Analyst Commentary & Balance Sheet:

The concern is relatively lightly covered in the analyst community which is not unexpected given it is located outside the U.S., small market size and relatively limited history as a public company. Three analyst firms have reissued Buy ratings over the past two months or so, however. Price targets proffered range from $14 to $22 a share. The current median analyst price target on the stock is right in the middle of that, or $18.00 a share.

RBC Capital was the last analyst firm to chime in and has the most optimistic price target ($22) on the stock currently. On December 20th, its analyst stated "Nabriva's stock is "undervalued based on numerous data points." The analyst thinks that the stock should rise significantly when data for the company's antibiotic lefamulin is released in 2H17." As of September 30, 2016, Nabriva had $73.9 million in cash, cash equivalents and marketable securities. In early November, Nabriva publicly announced its plan to raise additional capital through a rights offering. It then raised just over $20 million through this offer later in December.

Outlook:

The company does have two key Phase III readouts in the second half of the year. If they are positive the stock could appreciate further, but would probably have to come back to the markets at that point to raise additional funding. The company is targeting the same space as recent profiled companies Cempra (NASDAQ:CEMP) and Paratek Pharmaceuticals (NASDAQ:PRTK). Given it is a foreign company, I cannot access whether there has been insider activity in the stock. Given the stock has doubled from its recent lows, I wish I would have had it coming into December. However, I am not inclined to chase it here at this time.

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Thank You and Happy Hunting

Bret Jensen

Founder, Biotech Forum & Insiders Forum