Troubled Cempra Looks for a Lifeline, Hires Morgan Stanley to Review Options

Troubled Cempra Looks for a Lifeline, Hires Morgan Stanley to Review Options March 13, 2017
By Mark Terry, BioSpace.com Breaking News Staff

Chapel Hill, NC – Cempra announced that it has hired Morgan Stanley & Co. to help it review its strategic business operations.

On December 29, 2016, the U.S. Food and Drug Administration (FDA) issued a Complete Response Letter (CRL) concerning Cempra’s New Drug Applications (NDAs) for its antibiotic solithromycin. Solythromycin, both oral and intravenous, was being evaluated for the treatment of community-acquired bacterial pneumonia (CABP) in adults.

The FDA reported that it could not approve the NDAs in their current form, and requested more clinical safety data. It also required a resolution to inspection deficiencies found at the company’s manufacturing plant. It did not request more efficacy data.

The primary concern was related to liver toxicity. At the time, Cempra stated, “The FDA noted the size of the safety database is limited to 920 patients who received solithromycin at the proposed dose and duration, and is too small to adequately characterize the nature and frequency of serious hepatic adverse effects.”

The FDA then recommended a comparative study, as well as a study of about 9,000 patients, to exclude serious drug induced liver injury (DILI) at a rate of about 1:3000 with a 95 percent probability.

Although the company’s lead antibiotic has problems, the company has $231 million in cash, more than its current market cap of $188 million. Arsalan Arif, writing for Endpoints News, says, “Their stock tanked after investors concluded that the tainted product would have a long way to go before it ever earns cash. That sentiment remained largely unchanged even after a promising Phase III matchup of its oral antibiotic fusidic acid against an old standby. And the biotech slashed its staff after recording a Phase III failure for the lead program and a move to treat in the clinic.”

The company doesn’t specify what they’re planning on doing, although with $231 million in cash, the possibility of acquiring a company or assets seems high. Cempra says there’s no timetable, and, “No decision has been made as to whether the company will engage in a transaction or transactions and there can be no assurance that the review of strategic business options will result in any transaction, or the terms or timing of any potential transaction.”

There have also been discussions of completely abandoning solithromycin development. Andrew Berens, an analyst with Morgan Stanley, predicted in a note to clients in December that because of the size and cost of the study the FDA was demanding, as well as the probability of restrictive labeling if the drug was approved, that it would likely halt development.

Cempra’s second lead product candidate is fusidic acid. It has completed enrollment of a Phase III clinical trial in patients with acute bacterial skin infections. It is also evaluating a study of the drug for refractory infections in bones and joints.

At its annual report on February 28, the company indicated it had “initiated companywide cost and personnel reductions.” That involved laying off 67 percent of its staff, from 136 to 45 employees. It also made significant cuts in external spending related to market preparedness.

Cempra is currently trading for $3.73. Its yearly high was on September 28, 2016, when it traded for $26.22.

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