Baird Remains Bearish on Cempra Pharmaceuticals (CEMP); Believes Restrictions on Solithromycin Will Render Drug Commercially Unviable

Though the FDA’s Antimicrobial Drugs Advisory Committee voted in a 7-6 vote in favor of approval for Cempra Pharmaceuticals (NASDAQ:CEMP) pipeline drug solithromycin, an antibiotic designed to treat community-acquired bacterial pneumonia (CABP), believing its efficacy surpasses its hepatotoxicity risks, shares are falling just under 13%, adding to their 20% decline yesterday. Baird analyst Brian Skorney explains that “no one sounds thrilled about their vote on either side” and notes “The FDA’s safety review was pretty brutal.”

As such, the analyst warns, “If the FDA approves soli, we believe the restrictions will be so severe that it will essentially make it commercially unviable” and therefore reiterates an Underperform rating on CEMP with a price target of $6, which represents a 12% downside from where the shares last closed.

Skorney explains, “Without a clear recommendation, we could see the decision going either way but weighing against it will be the overwhelmingly definitive 12-1 vote saying that the risk of hepatotoxicity has not been adequately characterized.”

Ultimately, “No change to outlook on mixed panel vote. The vote was 7-6 in favor of approval but, as we outlined in our downgrade note, marketing restrictions are likely to be so burdensome, if approved, based on panelists concerns over drug-induced liver injury and the unanimous requests to restrict and monitor it, the commercial potential could be negligible. Although we expect the stock to give up some of its losses on short covering, we continue to see the soli opportunity as fundamentally impaired by safety concerns,” Skorney concludes.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Brian Skorney is ranked #1,193 out of 4,181 analysts. Skorney has a 46% success rate and realizes 1.9% in his annual returns. When recommending CEMP, Skorney yields 42.4% in average profits on the stock.

TipRanks analytics exhibit CEMP as a Buy. Based on 9 analysts polled in the last 3 months, 4 rate a Buy on CEMP, maintain a Hold, while 1 issues a Sell. The 12-month price target stands at $14.50, marking a nearly 12% upside from where the stock is currently trading.

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