Small biotech stocks are often considered “binary” lottery-ticket type events, with either a small chance of big upside, or a much greater probability of nothing at all. These stocks can soar to heights of euphoria and crash to the depths of depression. Unfortunately, Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH) investors are not winning the lottery today, as this stock crashes nearly 60%. The reason? TTPH disclosed that its lead asset, antibiotic eravacycline, failed to meet the primary endpoint in the Phase III IGNITE3 trial in complicated urinary tract infection (cUTI).
In reaction, B Riley FBR analyst Madhu Kumar slashed his price target from $11.00 to $6.00, while reiterating a Buy rating on the TTPH. Kumar’s new target implies a potential upside of nearly 160% from where the stock is currently trading.
Kumar commented, “With now two failures in cUTI (both IGNITE3 and IGNITE2), we consider it unlikely that TTPH will pursue further development of oral eravacycline in cUTI. While we recognize that the loss of the cUTI franchise significantly restricts eravacycline’s total addressable market in multi-drug resistant infection, the discontinuation will also likely materially reduce operating expenses and thus extend TTPH’s $161.4M cash runway.”
However, “While we consider this event a material negative event for TTPH and thus lower our price target from $11 to $6, we remind investors of the continued market opportunity for eravacycline in complicated intra-abdominal infection (cIAI), for which decisions on U.S. and European regulatory filings are expected in 2H18, and thus reiterate our Buy rating.”
Investors who listened to Kumar over the past year have made 48% on their analyst’s bets, according to TipRanks. Kumar is ranked #60 out of 4,743 analysts.
Wall Street is still rooting for TTPH stock’s success, earning a strong analyst consensus rating. TipRanks analytics exhibit TTPH as a Strong Buy. Based on 4 analysts polled in the last 3 months, 3 rate TTPH stock a Buy, while 1 recommends a Sell. The 12-month average price target stands at $6.67, marking a nearly 23% upside from where the stock is currently trading.