On July 25, biotech company Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH) announced data from a phase III trial of one of its lead development stage antibiotics. The company has picked up a considerable amount of speculative buy volume on the back of the news, with markets taking a position in the company in anticipation of a near term registration application submission.
Here's a look at the data that was just released (and that the company hopes will underpin a successful application) with a discussion of what the data tells markets about the chances of an FDA green light, or otherwise, once the submission is up for review.
So, as mentioned, it's an antibiotic asset and it's called eravacycline. The trial that just completed was set up to evaluate the safety and the efficacy of the drug in a group of patients with what's are complicated intra-abdominal infections (cIAI), which as the name suggests, are a type of abdominal infection that is difficult to treat with the current standard of care antibiotics in the space.
This difficulty to treat element is really important here – it's what's really going to underpin this company's potential to generate revenues from its asset portfolio going forward and – by proxy – it's going to play a key role in long term valuation. Why? Because Tetraphase is trying to develop a range of antibiotics that can be effective against so-called superbugs, which are infections that have arisen out of the ability of certain bacteria to resist the currently available antibiotic options.
Antibiotic resistance is at epidemic levels in the US. As antibiotics are more and more widely prescribed, the bacteria that are the root of the infections they treat are increasingly able to avoid them. Those bacteria that are resistant to the current treatments multiply and spread across a wider patient base and these patients basically have no options for treatment. Methicillin-resistant Staphylococcus aureus (MRSA) is a perfect and widely prevalent example. The Staphylococcus bacteria is widely treatable with off the shelf antibiotics. When it becomes resistant to these antibiotics, however, as is the case with MRSA, and infects a human, there's essentially nothing a physician can do to stop the spread of the underlying infection. The infection just spreads until it kills the patient.
The opportunity here is rooted in the necessity to continuously develop new types of antibiotics; ones that can treat infections against which the currently available SOCs are useless.
And that's what Tetraphase is trying to do.
The reason we've gone into that in so much detail is that it's important to understand this concept as it relates to what a company is trying to prove when it takes a drug through a clinical trial. In short, the development asset doesn’t need to outperform the current standard of care, it just needs to show that it's as good. With it being a newer type of antibiotic, fewer bacteria will be resistant to it and – by proxy – it should be able to outperform SOCs in the hard to treat population.
As it turns out, Tetraphase's eravacycline can do just that. The trial that just read out compared eravacycline to an already approved antibiotic called meropenem in the above mentioned cIAI population. The trial met its primary efficacy endpoint, proving that eravacycline is non-inferior to meropenem in this population, and also demonstrated a clean safety and tolerability profile across the population that took the drug.
So the drug works and it does so safely, in a target indication for which there exists a substantial unmet need right now.
What's next?
Now comes regulatory submissions. Tetraphase wants to get eravacycline approved in both Europe and the US and it's going to go after the European market first. Alongside the latest data release, management outlined that it's going to submit a registration application to the European Medicines Agency (EMA), which is the European equivalent of the FDA, at some point during the final quarter of this year. Once that's submitted, Tetraphase will turn its attention to the US market and will submit a New Drug Application (NDA) to the FDA during the first quarter of 2018.
Let's close out by answering the initial question, then: what are the chances of a green light in the target regions?
In two words, very good. There aren’t any immediate concerns surrounding either safety or efficacy, meaning that side of the application is all but wrapped up. The risk is rooted in the manufacturing side of the equation, which is the part of these applications that wider markets generally remain blinded to. With this said, any manufacturing issues are generally resolvable, so even if there's a problem upfront and the company receives a CRL on the applications, it's unlikely to affect Tetraphase's chances of success with this asset longer term.