Cempra Rises on Late-Stage Trial

Shares of Cempra Inc. (NASDAQ: CEMP) saw a handy gain early on Monday after Toyama Chemical announced that it had begun Phase 3 clinical trials with solithromycin in Japan for patients with community-acquired bacterial pneumonia (CABP) and other respiratory infections. Where Cempra stands to benefit on this trial is the royalties and milestone payments it is looking to gain.

Earlier this year, Toyama completed a Phase 2 study of Japanese patients with mild to moderate CABP. Overall safety and tolerability was positive and all efficacy outcome measures favored solithromycin. These data, and the data from Cempra’s studies, were reviewed by Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) before finalizing the Phase 3 study protocol.

Toyama owns exclusive rights to develop and commercialize solithromycin in Japan for respiratory tract infections and other indications in adults and pediatric patients.

Back in November of 2016, Cempra announced it had received a $10 million milestone payment when Toyama decided to progress to Phase 3 studies. So far Cempra has received $40 million of upfront and milestone payments from Toyama and can earn an additional $30 million, for a total of $70 million, in payments from Toyama based on the achievement of certain objectives. If approved, Toyama would pay tiered royalties, adjusted based on sales, to Cempra following launch of solithromycin in Japan.

Keep in mind that Cempra only has a market cap of just below $400 million.

Prabhavathi Fernandes, Ph.D., CEO of Cempra, commented:

We are excited and encouraged to see Toyama commencing their Phase 3 program and moving another step closer to the potential approval of solithromycin in Japan, where already high antibiotic resistance in pneumococcus strains and other CABP pathogens is rising, highlighting the urgent unmet medical need for new therapies.

Fernandes added:

We are also pleased that the Toyama Phase 3 trial will be against levofloxacin as the comparator, which is the fluoroquinolone used most frequently in outpatient CABP treatment.

Shares of Cempra closed Friday up about 15% at $7.55, with a consensus analyst price target of $15.13 and a 52-week trading range of $6.45 to $32.31. Following this release, the stock was up an additional 9% at $8.25 in early trading indications Monday.