Cempra's Lead Antibiotic Has Blockbuster Potential

CHAPEL HILL, NC ( TheStreet) -- Antibiotics certainly do not inspire the same excitement as oncology products and orphan disease drugs but one simply needs to look at Cubicin or Zyvox to see the right drugs can be significant winners. Cempra ( CEMP) has a potential winner in its lead antibiotic compound solithromycin.

Solithromycin is a fourth generation macrolide with intravenous and oral formulations. Cempra's initial plan is to develop the antibiotic as a treatment for community acquired bacterial pneumonia (CABP) but the company also has a grant from BARDA to extend solithromycin into bio-terror infections, pediatric and special populations (pregnant women, for instance.)

Right now, Cempra is conducting a single phase III trial for the oral formulation in CAPB, but a recent financing should provide the money necessary to start a second phase III oral-to-intravenous trial in CAPB.

The best way to think about the market potential of solithromycin is to look at Sanofi's ( SNY) Ketek, a third-generation macrolide antibiotic marketed approved by the FDA in 2004. There was significant enthusiasm surrounding Ketek because it demonstrated strong efficacy against bacteria resistant to first and second generation macrolides. Early expectations had Ketek achieving peak sales of $1.5 billion in the U.S. alone.

Ketek's first year on the market was strong, with 3.3 million U.S. prescriptions generating about$193 million in sales. Safety troubles lurked under the surface, however. Ketek use was linked to liver toxicity and liver failure, which were missed prior to the drug's approval, in part, due to falsified clinical trial data. Eventually, the FDA added a black-box safety warning to the Ketek label and sales collapsed.

The Ketek story is critical for Cempra because it indicates both the market potential of solithromycin and highlights the safety risks that must be navigated. In general, solithromycin has shown strong efficacy even against the bacteria that are resistant to the first, second, and third generation macrolides. In this way, solithromycin's billion-dollar market potential is similar to what was expected from Ketek when it was approved. Of course, the real question is whether that efficacy comes with the same safety issues which derailed Ketek.

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