3 Antibiotic Stocks Targeting Most Urgent Bacterial Threats

NEW YORK ( TheStreet) -- The U.S. Centers for Disease Control and Prevention recently issued a report highlighting antibiotic resistance as a growing public health issue and a catalyst for the development of novel antibiotic compounds. Investing in companies developing new antibiotics has been historically difficult because of the drugs' limited peak sales potential and risks posed by generic competition. But this investment overhang is lifting due to the dearth of new antibiotic agents and the growing threat of antibiotic resistance.

The CDC report and other recent government actions are improving the economics of the antibiotic market, making now the time to invest in high-quality companies focused on particular areas of need.

The U.S. government characterizes three strains of bacteria as urgent threats: Clostridium difficile (C. difficile), Carbapenem-resistant Enterobacteriaceae (CRE) and drug-resistant Neisseria gonorrhoeae. Let's take a look at each of these bacteria in detail and highlight companies currently developing antibiotics against them.

C. difficile: The CDC estimates there are about 250,000 C. difficile infections a year leading to 14,000 deaths and $1 billion in medical costs. From 2000 to 2007 annual deaths increased by 400% due to the development of a strain that was resistant to fluoroquinolone antibiotics.

Cubist Pharmaceuticals ( CBST) is best placed to address the C. difficile threat. The company markets Dificid, approved to treat C. difficile, and has a follow-on compound, surotomycin, in phase III studies. Based on phase II study results, the latter has the potential to significantly reduce the risk of C. difficile recurrence and limited the impact on "healthy" bacteria that normally inhabits the bowel.

Carbapenem-resistant Enterobacteriaceae (CRE): While there are only 9,000 infections and 600 deaths a year from this bacteria, this particular strain is feared because almost none of the currently approved antibiotics can treat it effectively. The high level of CRE resistance to current drugs means about 50% of bloodstream infections are fatal. As such, there is a pressing need to find new products that have the capacity to treatment CRE infections.

Tetraphase ( TTPH) recently published additional data on eravacycline, a next-generation tetracycline, showing efficacy against multi-drug resistant bacteria, including CRE. Eravacycline phase II data for complicated intra-abdominal infections shows broad activity against gram-positive and negative bacteria, which means the drug has the potential to be a broad spectrum antibiotic addressing the urgent threat of CRE.

Neisseria gonorrhoeae: This bacteria strain is responsible for about 246,000 infections a year but is not nearly as deadly as the other two threats. Yet neisseria is highly prevalent and is the second most common infection with about 800,000 U.S. cases reported in 2011. About 30% of reported cases of neisseria infection are resistant to currently approved drugs, which is why the U.S. government labels the bacteria an urgent threat.

Cempra ( CEMP) is developing solithromycin, which in a phase II study demonstrated a 100% cure rate against uncomplicated urogenital gonorrhea. It's not clear how many of these patients had drug-resistant strains. Pre-clinical data suggests solithromycin would have strong activity against resistant strains. Cempra has not disclosed additional development plans in this area as it is looking for non-dilutive funding, which should not be a large hurdle given the need and solithromycin's apparent activity.

Tetraphase has also recently published some data showing eravacycline efficacy in drug-resistant Neisseria gonorrhoeae.

Sobek is long Cempra and Tetraphase.
David Sobek has been writing on biotech for a number of years through various outlets with a general focus on small cap oncology and antibiotics companies. He received his PhD in political science from Pennsylvnia State Univeristy in 2003 and a BA in international relations from The College of William and Mary in 1997.