Pharmaceutical company Cempra (NASDAQ: CEMP) creates antibiotics to treat bacterial infections. The company produces Solithromycin, a treatment for community-acquired bacterial pneumonia that is now is Phase III testing. Investors believe Solithromycin has blockbuster potential, especially after Cempra announced successful results from the global Phase III study.

In the past, investors have not been eager to get involved with the antibiotic sector of healthcare because it was viewed as unprofitable. However, antibiotics are starting to become lucrative due to the increase of superbugs, or infections that are resistant to antibiotics.

Additionally, on January 7th Cempra announced prices for a secondary offering. The press release explained that there will be 5.250 million shares of common stock for $24.50 a share for the underwritten public offering. Gross proceeds will be approximately $128.6 million. Cempra shares have increased in the past month, closing at $14.42 on December 1st and surging up to $23.15 where it closed on January 7th.

On January 7th, analyst Ed Arce of Roth Capital initiated coverage on Cempra with a Buy rating and a $35 price target. Arce is bullish on Cempra because of Solitheomycin. The analyst notes, “Solithromycin could reach peak sales of about $2 billion as it becomes the new [standing offer contract] for both community acquired bacterial pneumonia (CABP) and gonorrhea.” He continued, “Additional indications are likely given Solithromycin’s broad-spectrum coverage and excellent safety profile, and… continued strong strategic interest in the antibiotics space makes a takeout in 2016 a distinct possibility.” Arce concluded by voicing his confidence in the drug, “We believe solithromycin has the safety profile and pharmacoeconomic benefits (via the IV-to-oral switch) that will be viewed as highly attractive by hospital P&T committees and attending physicians alike, even at the substantially higher ‘hospital pricing.’”

Ed Arce has a 59% success rate recommending stocks over the past year with a +30.1% average return per recommendation.

Separately on January 5th, analyst Ritu Baral of Cowen & Co. maintained an Outperform rating on Cempra and raised her price target from $21 to $35. Baral also rated Cempra in light of Solithromycin, noting “Topline data from the Ph3 SOLITAIRE-Oral trial looks positive, supportive of success in the SOLITAIRE-IV trial and overall solithromycin approvability. Safety looks at least comparable to moxifloxacin, a quinolone, the current trial’s active comparator.” The analyst concluded, “We are raising our target on increased chances of solithromycin success.”

Ritu Baral has a 45% overall success rate recommending stocks over the past year with a +19.9% average return per recommendation.

Alan Carr, analyst for Needham, also rated Cempra as he maintained a Buy rating on the stock and raised his price target from $28 to $42 on January 5th. Carr is bullish on the stock due to the successful test on Solithromycin. He noted, “The trial met the primary endpoint of non-inferiority to comparator moxifloxacin. Safety profile remains strong… [Management] plans to guide for timing of results from the second Phase 3 trial… in Apr 2015.” Carr concluded, “We assume the trial will be completed YE15, with launch YE16… We believe solithromycin has over $2B in [worldwide] peak sales potential given positioning for use in community setting.”

Alan Carr has a 71% overall success rate recommending stocks from the past year with a +40.6% average return per recommendation.

On average, the top analyst consensus for Cempra on TipRanks is Strong Buy.