Optimer Pharma’s (OPTR) second quarter 2010 loss of 27 cents per share was narrower than the Zacks Consensus Estimate by 3 cents and the year-ago loss by 10 cents. The narrower loss was attributed to lower costs since the company cut its research & development (R&D) spending in the quarter.
Optimer does not have any marketed products at present. It earns revenues primarily from research grants and collaborative agreements. Revenue in the reported quarter declined 16% year over year to $357,436 due to the absence of funds from collaborative research agreements.
The company has two late-stage anti-infective pipeline candidates, fidaxomicin and Pruvel (prulifloxacin), which are being developed for the treatment of clostridium difficile-associated diarrhea and travelers’ diarrhea, respectively.
Operating expenses during the quarter declined 16% year over year to $10.8 million due to the lesser amount spent by the company on fidaxomicin and Pruvel development in the reported quarter. R&D expenses in the quarter declined approximately 40.2% year over year to $6.4 million.
We believe that investor focus is currently more on the development of the company’s portfolio rather than the financials. Recently, the company submitted a Marketing Authorization Application to the European Medicines Agency seeking approval for marketing fidaxomicin in Europe as a treatment for patients suffering from clostridium difficile infection.
In May 2010, Optimer entered into a long-term supply agreement with India-based Biocon Limited aimed at manufacturing the active pharmaceutical ingredient of fidaxomicin.
Our Take & Recommendation
Optimer has limited sources of revenue and is largely dependent on the success of its lead pipeline candidates, fidaxomicin and Pruvel. Although we are optimistic about the prospect of both drugs in terms of their clinical trial results and regulatory approvals, we are very concerned about the intense competition in this area. We believe, on approval, the initial sales ramp may be slow.
Consequently, we believe that the risk/reward profile at Optimer is balanced. This forms the basis of the short-term Zacks #3 Rank (‘Hold’) and the long-term Neutral stance on the stock.
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