Good but not good enough leads to Cempra slump

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With a sevenfold runup in its share price at midyear since floating in 2012, there was only one way for Cempra Holdings to go on a key data release for antibacterial solithromycin: down.

The ketolide met the primary endpoint of non-inferiority to Avelox in early clinical response in an IV-to-oral trial in pneumonia patients, but fell short numerically on several yardsticks of clinical success at short-term follow-up. Success on the measures sought by regulators means approval is likely, but investors fear that solithromycin will struggle to gain physician adoption as the comparative agent has already lost market exclusivity.

Worse than bear

Shares tumbled 28% on Friday to $19.29, capping a 12-week slide that until Friday mirrored the Nasdaq biotechnology index’s losses.

This decline is surprising given that the price is now below what Morgan Stanley analyst Andrew Berens rated as the “bear” scenario – one in which the agent failed to show efficacy. But this is a sign of how investors view the commercial challenges of an agent trying to break into a genericised space and in which access will be controlled by hospital formularies.

Solitaire IV was designed to confirm positive findings from an oral-only study announced earlier this year, although this time the IV-to-oral switch regimen was used to replicate more closely the treatment regimens for many patients with community-acquired bacterial pneumonia patients once they have been admitted for treatment.

In meeting the primary endpoints sought by the US FDA and European Medicines Agency, Solitaire IV ought to be viewed as a success. Cempra showed the FDA-mandated non-inferiority on early clinical response 72 hours after initiation of therapy, and, for the EMA, treatment success at a five to 10-day follow-up in patients with the most severe pneumonia.

Secondary endpoints, however, reveal how the agent might struggle to differentiate itself from Avelox, or moxifloxacin. On the short-term follow-up measure in the intent-to-treat population moxifloxacin was judged to be clinically successful in 88.7% of patients versus 84.6% for solithromycin; among those patients who were clinically evaluable the numbers were 92.8% to 86.4% respectively.

The clinically evaluable population omitted five solithromycin patients who were declared to be treatment failures after an unexpected supply shortage forced them to be switched to other drugs.

The stumble on secondary endpoints prompted Leerink analyst Paul Matteis to reduce his peak sales forecast from $1bn to $600m.

If you build it, will they come?

The two-part approach to the project complicates its outlook, given that the all-oral regimen could be prescribed to patients treated on an outpatient basis; Morgan Stanley estimates at peak the solithromycin, also known as CEM-101 Oral, could take 5% of the market share for macrolides, or 2.9 million prescriptions a year.

In this setting payer adoption will be essential. As solithromycin was non-inferior rather than superior in the all-oral trial, Cempra will need to be mindful of the generic competition in moxifloxacin, in which Teva, Dr Reddy’s and other manufacturers are active in the US; being placed on a higher tier than the generics will limit uptake.

In the IV-to-oral setting, it will be the hospital pharmacy and therapeutics committees that will sway the decision. Given that hospitals are reimbursed for admissions rather than for individual inputs like drugs, and that pneumonia is one of the top 10 causes for Medicare admissions, they might take some persuading.

In the heat of the biotech bull market Cempra’s shares peaked at $45.34, above where Jefferies put a reasonable price for the group even if solithromycin outperformed its $1.7bn peak sales estimate by 30%. Cempra’s setback is another example of why investors should take note whenever sellside analysts warn of overheated expectations.

Study Trial ID
Solitaire-IV NCT01968733
Solitaire-Oral NCT01756339

To contact the writer of this story email Jonathan Gardner in London at jonathang@epvantage.com or follow @ByJonGardner on Twitter

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