Will The FDA Approve Cempra Inc’s CABP Drug? This Analyst Says Yes

Cempra Inc (NASDAQ:CEMP) shares went on a roller-coaster ride today after the FDA’s Antimicrobial Drugs Advisory Committee voted 7-6 that solithromycin’s efficacy outweighs its risks for the treatment of communityacquired bacterial pneumonia (CABP). Eventually, Cempra shares closed at $6.85, down nearly 9%, after rising as much as 24% earlier.

Roth Capital analyst Michael Higgins chimed in on the news, reiterating a Buy rating on CEMP, with a price target of $27.50, which represents a potential upside of 299% from where the stock is currently trading.

Higgins wrote, “While the tone of the meeting was quite negative, the underlying problem of antibiotic resistance and the lack of adequate remedies, in our view, led to the positive recommendation, albeit by the smallest of margins. While we did not find as much of the FDA’s attention on the problem of antibiotic resistance as we expected, the dramatic increase in its attention over the past ten years tells us the agency will find a way to approve solithromycin.”

“As we described November 2, following the release of the FDA’s Briefing Documents, we continue to believe solithromycin will be approved based on the growth in antibiotic resistance in treating CABP as well as the potential to place strong labeling restrictions and a Phase 4 study to monitor its hepatic risks. We could see solithromycin contraindicated in patients with renal impairment until studies can demonstrate that it can be safely administered. While panel members suggested that solithromycin’s dose be cut in half in this patient group, we are not expecting the agency to go along with that, but we do expect it will be approved,” the analyst continued.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Higgins has a yearly average loss of 20.4% and a 24.1% success rate. Higgins has a 59.8% average loss when recommending CEMP, and is ranked #3963 out of 4162 analysts.

Out of the 9 analysts polled by TipRanks (in the past 3 months), 4 rate Cempra stock a Buy, 4 rate the stock a Hold and 1 recommends to Sell. With a return potential of 164%, the stock’s consensus target price stands at $18.10.


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