Our Biotech Pick’s Pipeline Advances

Biotech Theravance Biopharma (Nasdaq: TBPH) this week reported another piece of good clinical data.

The company reported that multiple studies conducted on VIBATIV—currently its only marketed drug—showed superior in vitro potency for VIBATIV against the S. aureus pathogens compared to other commercially available antibiotics. VIBATIV is already approved to treat S. aureus, but the company hopes the studies will differentiate it from competing antibiotics.

S. aureus (more commonly known as staph, as in staph infection) is the leading cause of hospital-acquired infections. The methicillin-resistant S. aureus (MRSA) is a variant that, through the overuse of antibiotics, has developed resistance to various antibiotics and thus is particularly difficult—and expensive—to treat. Since those in the hospital often have weaker immune systems compared to the general population, infection is a real concern.

VIBATIV showed dramatically lower MICs against MRSA (ranging from 8 times to 32 times lower) than daptomycin, ceftaroline, vancomycin and linezolid. MICs, or minimum inhibitory concentrations, measure the lowest concentration of a drug that prevents visible growth of the bacterium being tested. In other words, the in vitro tests indicates that of the antibiotics studied, by far, one required the least amount of VIBATIV to stop MRSA from growing.

VIBATIV also showed similar superiority when tested on MRSA and MSSA (methicillin-susceptible S. aureus) cystic fibrosis (CF) clinical strains. CF patients who acquire or have previously acquired MRSA infection have worse survival rate than those who never had MSRA. Thus, CF is a particular area of significant medical need.

As noted, VIBATIV is currently Theravance’s only marketed product. Last year, the generated $17.6 million in net sales. (The company had another $31 million in revenue from collaborative agreements with GlaxySmithKline (NYSE: GSK).) Clearly, the drug isn’t a blockbuster, nor does Theravance intend it to be. VIBATIV’s job is to generate revenue for the company to fund Theravance’s advancement of its sizeable pipeline. If the above studies help to convince more physicians to prescribe VIBATIV, that’s a positive.

In late May, Theravance also announced positive clinical data from two Phase 3 studies, jointly conducted with Mylan (Nasdaq: MYL), of revefenacin (TD-4208), a long-acting muscarinic antagonist (‘‘LAMA’’) being developed as a potential once-daily, nebulized treatment (the medicine is turned into mist form by the nebulizer machine and breathed in). Currently available LAMAs only come in handheld devices that some patients find difficult to use and would prefer a nebulizer.

The studies, part of a larger ongoing Phase 3 program, included more than 1,250 patients with moderate to very severe COPD (Chronic Obstructive Pulmonary Disease) showed clinically-significant higher efficacy and comparable safety profile to placebo.

The third study in the Phase 3 program is expected to be completed by mid-2017, and assuming the clinical data is supportive, Theravance and Mylan will file for approval with the FDA before the end of this year.

Under their agreement, Mylan will lead future commercialization of the drug and the profits from U.S. sales will be split 65-35 (Mylan gets the bigger piece). Theravance could separately receive up to $205 million in cash from milestones.

We currently rate TBPH a “hold.” The stock has done very well for us and currently trades at a level well above our suggested buy-up-to price. Small biotechs advancing toward expected drug approval often experience a big jump in share price and could undergo a correction later on. We don’t recommend chasing the rally.    

For a more detailed table of current recommendations, including suggested buy-up-to prices, as well as information on closed trades, log into our website and click on the ‘Portfolio’ link.

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