Optimer Pharmaceuticals, Inc.’s (OPTR) third quarter 2011 loss per share of 57 cents was wider than the year-ago loss of 30 cents and the Zacks Consensus Estimate of 52 cents. The wider loss was the result of increased operating expenses associated with the commercial launch of antibiotic Dificid (fidaxomicin), Optimer’s sole marketed drug, which completely offset the huge jump in revenues.
The third quarter revenue of $11.1 million beat the Zacks Consensus Estimate of $5 million by more than two times. Revenues were also significantly above the prior-year figure of $6.7 million. The revenue outperformance was driven by strong sales of Dificid, launched in the US in July, for the treatment of clostridium difficile-associated diarrhea (CDAD), also known as clostridium difficile infection (CDI). Dificid generated revenue of $10.6 million in the reported quarter. Optimer recognizes Dificid revenue on delivery to wholesalers indicating that the $10.6 million in sales includes inventory stocking.
Selling, general and administrative (SG&A) expenses galloped 460.5% to $26.9 million in the quarter. The sharp rise was primarily attributable to increased expenses on establishing a commercial infrastructure for the launch of Dificid. The rise in marketing expenses also led to the increase. SG&A expenses also included a $3 million payment to partner Cubist Pharmaceuticals (CBST). Research and development (R&D) expenses increased 28.4% to $10.4 million in the reported quarter. We believe that investor focus is currently more tuned to the commercial performance of Dificid rather than financials per se.
Dificid in EU and Canada
In the European Union (EU), Dificid will be marketed as Dificlir and is currently under review. In September this year, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) recommended approving Dificlir in the EU for the treatment of CDAD. A decision from EMA is expected by the end of this year. In Canada, Optimer has filed the new drug submission (NDS) to Health Canada and has been granted priority review. The company has also set up a Canadian subsidiary to distribute Dificid directly to the Canadian markets on approval. Regulatory nods for Dificid in these territories will further boost sales of the drug.
Pipeline Update
Early in November 2011, Optimer announced that it has decided to halt the development of pipeline candidate Pruvel for the treatment for traveler's diarrhea. In the past Optimer had reported positive top-line results from two late stage studies of the antibiotic. However, due to the occurrence of mild or moderately severe cutaneous rash in a drug interaction study, the trial was subsequently terminated in 2010. Optimer plans to return all rights to the candidate to the Japanese company Nippon Shinyaku.
Our Recommendation
We currently have an Outperform recommendation on Optimer. The stock carries a Zacks #2 Rank (short-term “Buy” rating).
We are highly encouraged by the performance of Dificid in the US and the positive EU recommendation for Dificlir. Dificid/Dificlir scores better than currently available treatment options on many parameters. Particularly, we believe the inclusion of superior recurrence benefits over ViroPharma’s (VPHM) Vancocin in the product label will provide valuable benefit and help Dificid sales. Dificid is the first drug to be approved in almost 25 years for the treatment of CDAD and thus targets a market with significant unmet medical need. Further, the deals with Cubist and Astellas are positive for Optimer as the company will benefit from their experience in marketing hospital based antibiotics.
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