Optimer Partners Cubist for Dificid - Analyst Blog

Optimer Pharmaceuticals Inc. (OPTR) recently announced an exclusive two-year agreement with Cubist Pharmaceuticals Inc. (CBST) to co-promote its lead pipeline candidate, fidaxomicin, to be sold as Dificid in the US. The collaboration follows on the heels of a US panel backing for Dificid for the treatment of Clostridium difficile infection (CDI), which is also known as Clostridium difficile-associated diarrhea (CDAD).

The FDA decision on Dificid is expected in May 2011. The candidate is also under regulatory review in the EU.

Per the terms of the deal, Optimer will book sales on the candidate, if approved. Optimer also retains the new drug application (NDA) for Dificid. It will also be responsible for FDA approval and manufacturing of the candidate. In exchange for its efforts in co-promoting Dificid, Cubist will be entitled to quarterly service fees of $3.75 million ($15 million per year) over the two-year period beginning from the year of first commercial sale. Cubist will also receive additional fees of $5 million in the first year and $12.5 million in the second year should sales exceed an unspecified target. Cubist can also get a percentage of gross profits should sales go beyond these targets.

Though the agreement will terminate after two years from the first commercial sale of Dificid, it can be renewed or terminated earlier upon agreement by the two companies.

Optimer plans to market the drug to physicians, hospitals, long-term care facilities and other healthcare institutions with the help of Cubist’s existing U.S. hospital sales force and medical affairs team, which holds experience in marketing Cubist’s lead antibiotic Cubicin for the treatment of complicated skin infections. Besides Cubist’s sales efforts, Optimer plans to hire 100 sales representatives to boost the marketing of Dificid. The company is banking on the drug for profitability.

We believe the deal is positive for Optimer as it will benefit from Cubist’s experience in marketing hospital based antibiotics. Cubist is developing a proprietary antibiotic of its own for CDI with phase II data expected in 2011. With the current deal, Cubist can access the CDI market much earlier than it would have with its own candidate. The deal also provides cash to Cubist without adding any costs.

We remind investors that Optimer recently won a unanimous recommendation for approval of Dificid from an advisory panel of the FDA. The panel believes Dificid was safe and efficacious in the treatment of CDI. The committee concluded that Dificid at 30 days was superior to ViroPharma’s (VPHM) Vancocin, the only FDA approved antibiotic for the treatment of CDI. Optimer recently held a conference call to discuss the outcome of the meeting in details. The panel supported the inclusion of superiority over Vancocin in the Dificid label. However, the panel vote was split on the language to be used to define the recurrence benefits in the label.

The positive recommendation does not surprise us and we expect the candidate to be approved by the FDA.

Our Recommendation

We currently have a Neutral recommendation on Optimer, which is supported by a Zacks #3 Rank (short-term “Hold” rating).

We are encouraged by the positive opinion of the advisory committee on Dificid as well as the Cubist deal. Although we are quite optimistic regarding the approval of Dificid, our views are moderated by the competitive scenario. Several pharmaceutical and biotechnology companies have already established themselves in the market for the treatment of CDI and/or infectious diarrhea and many other companies are currently developing products which will compete with Dificid and Optimer’s another pipeline candidate Pruvel (for the treatment of infectious diarrhea). The market includes players like Pfizer (PFE), Bayer (BAYRY), Sanofi-Aventis (SNY), Roche (RHHBY), Johnson & Johnson (JNJ), ViroPharma (VPHM) and Salix Pharmaceuticals (SLXP). However, we are pleased to note that Dificid scores better than the current available treatment options on many parameters. We are particularly concerned about the presence of generics in the market. The uncertainty surrounding the regulatory filing of Pruvel is another area of concern.