Company Update (NASDAQ:CEMP): Here’s Why Cempra Inc Shares Crashing 15%

Cempra Inc (NASDAQ:CEMP) investors are running for the hills after the drug maker disclosed a clinical setback in its financial results today, saying that its Phase 3 clinical trial, SOLITAIRE-U, for the treatment of uncomplicated genitourinary gonorrhea (GC) with or without concomitant chlamydia infection failed to demonstrate the non-inferiority of solithromycin.

Cempra shares reacted to the news, falling nearly 15% in early trading Tuesday.

“We have made substantial progress in recent weeks to clarify our existing clinical programs, including positive phase 3 results with fusidic acid, further define the next steps to advance solithromycin, and take significant cost-reduction actions to preserve our sizable cash resources as we evaluate the best investments, including potential external opportunities, to deliver value to patients and shareholders,” said David Zaccardelli, Pharm.D., acting chief executive officer of Cempra.

Fourth Quarter 2016 and Recent Corporate Highlights


  • On November 4, 2016, the U.S. Food and Drug Administration (FDA) Antimicrobial Drugs Advisory Committee (AMDAC) voted (7-6) that efficacy results of Cempra’s solithromycin outweigh the risks for the treatment of community-acquired bacterial pneumonia (CABP). Members of AMDAC voted unanimously (13-0) that there was substantial evidence of the efficacy of solithromycin for CABP. The committee also voted (12-1) that the risk of hepatotoxicity with solithromycin had not been adequately characterized and discussed a variety of potential approaches to further characterize the existing liver safety information on solithromycin.
  • On December 29, 2016, Cempra announced the company had received a complete response letter (CRL) from FDA relating to the company’s new drug applications (NDAs) for oral and intravenous solithromycin for the treatment of CABP in adults. The CRL stated that the FDA could not approve the NDAs in their present form and noted that additional clinical safety information and the satisfactory resolution of manufacturing facility inspection deficiencies were required before the NDAs may be approved.
  • Last week, the company met with the FDA to discuss the issues identified in the CRL.
  • At the meeting, the FDA reiterated their request for additional clinical safety data prior to approval. Based on input from the FDA at the meeting, Cempra is developing a protocol which will propose including fewer than 9,000 patients at the time we respond to the CRL, and will propose to deliver data from defined cohorts as the study progresses.  The company plans to discuss the protocol with the FDA to determine if it could support an initial approval in a limited group of patients with an urgent unmet need, while the company continues to accumulate a larger post-approval safety database to support a potential label expansion into the broader CABP population. If the company and FDA agree on a protocol, Cempra plans to seek non-dilutive funding to support the execution of the study.
  • Cempra is preparing responses to the Day 120 questions the company has received from the European Medicines Agency (EMA) related to the marketing authorization application (MAA) the company submitted in June 2016 seeking approval of solithromycin for adults with community-acquired pneumonia. The EMA has suggested a post-approval clinical safety study (PASS) in the EU and we believe the EMA may request additional data prior to approval. We are currently assessing the path forward with the EMA that we believe would be most likely to achieve a positive benefit/risk assessment from them.



  • Cempra has analyzed the data from the initial patient cohort of 262 patients in SOLITAIRE-U, a phase 3 study evaluating a single 1000 mg dose of oral solithromycin for treatment of uncomplicated genitourinary gonorrhea (GC), with or without concomitant chlamydia infection, compared with intramuscular ceftriaxone (500 mg) plus oral azithromycin (CTX/AZI) (1000 mg).   While solithromycin demonstrated high success rates of 80.5 percent in the microbiological intent to treat (mITT) population (defined as achievement of a negative urethral or cervical swab culture at day seven to eight among those patients who had culture confirmation of GC infection at baseline) and 91.3 percent in the microbiologically evaluable (ME) population (comprised of those patients with a positive baseline culture who returned for their follow-up evaluation), and showed a 100 percent success rate for females in the ME population, solithromycin did not demonstrate non-inferiority (NI) to standard of care treatment given the pre-specified 10 percent NI margin in the mITT population. The success rates for CTX/AZI in the mITT and ME populations were 84.5 percent and 100 percent, respectively.
  • Given the limited number of females and adolescents in SOLITAIRE-U, the National Institute of Allergy and Infectious Disease (NIAID) agreed to fund an expansion of the trial to enroll up to 76 women and adolescents (age 15-17) under a cooperative research and development agreement.  Enrollment of this trial expansion has been much slower than anticipated.
  • We believe that the small number of solithromycin treatment failures observed in SOLITAIRE-U could be reduced in an approval-enabling study with an adjustment to the dosing regimen, as we believe the treatment failures were most likely related to the duration of study drug exposure at the site of infection. We plan to discuss our next steps with the GC program with NIAID and the FDA, as resistance to existing therapies for GC has created an urgent unmet medical need. In SOLITAIRE-U, no GC isolates demonstrated solithromycin resistance at baseline, and there was no emergence of solithromycin resistance in the isolates obtained at follow-up cultures.

Nonalcoholic steatohepatitis (NASH)

  • In September 2016, Cempra announced interim results from an exploratory trial showing anti-NASH effects in the first six NASH patients dosed with solithromycin. Based on the safety profile and activity seen in the first six patients, Cempra continued this study to obtain data from up to 15 NASH patients. In the first quarter of 2017, four additional patients had completed treatment and undergone end-of-treatment liver biopsies, and the company has evaluated the data from the cohort of 10 patients.
  • While data from the initial six patients were promising, the overall efficacy from patients receiving a reduced dose of 200 mg three times a week (after a 200 mg loading dose), including the second cohort of four patients, is unclear.  Therefore, Cempra has elected to suspend the NASH development program for solithromycin at this time.


  • Based on safety data from several of the initial patients dosed in an exploratory study evaluating the effect of long term systemic solithromycin administration on airway inflammation in chronic obstructive pulmonary disease (COPD), Cempra has closed the study.



  • We have an ongoing ophthalmic development program for solithromycin and are completing preclinical work to support a potential IND. Many of the pathogens that cause CABP are the same as, or similar to, the pathogens that cause eye infections and we are developing an ophthalmic formulation of solithromycin as a potential treatment for bacterial conjunctivitis and other ophthalmic conditions. We plan to request a pre-IND meeting with the FDA during 2017 to discuss moving our ophthalmic program forward into clinical trials.  We believe there is minimal spending required over the next 12 months to potentially advance our ophthalmic program.

Fusidic Acid

On February 24, Cempra announced positive topline results from a phase 3 study of oral fusidic acid in patients with acute bacterial skin and skin structure infections (ABSSSI). Fusidic acid was well tolerated in the study and achieved the primary endpoint, demonstrating non-inferiority (NI) (10% NI margin) of oral fusidic acid compared to oral linezolid for early clinical response (ECR) in the intent to treat (ITT) patient population. Based on the results of this study, Cempra plans to meet with the FDA to discuss the next steps required to bring fusidic acid to patients in the United States.

Corporate Restructuring Action

As a consequence of the CRL we received, and subsequent discussions with the FDA, resulting in a delay of the potential approval of solithromycin, we recently initiated companywide cost and personnel reductions.  These actions have resulted in an approximately 67 percent reduction in our workforce, from 136 to 45 employees, and significant reductions in external spending related to commercial preparedness and non-essential activities. The principal objective of the reductions is to enable us to conserve our financial resources as we evaluate the best path forward with our existing pipeline and potential business development opportunities.

Business Development Activities

As Cempra progresses its internal programs, the company also is actively engaged in a process to evaluate and assess external late-stage assets and other potential strategic business opportunities to determine the best use of its significant cash resources and clinical programs to deliver value to patients and shareholders through internal and/or potential external opportunities.

Financial Results for the Three Months Ended December 31, 2016

For the quarter ended December 31, 2016, Cempra reported a net loss of $31.4 million, or $0.60 per share.  During the same period in 2015, Cempra reported a net loss of $21.2 million, or $0.48 per share.

Research and development (R&D) expense in the fourth quarter of 2016 was $21.0 million, an increase of five percent compared to the same quarter in 2015. The higher R&D expense was primarily due to costs related to pre-approval manufacturing of solithromycin and related scale-up activities at manufacturers, partially offset by a decrease in clinical trial expenses for solithromycin. General and administrative expense was $18.2 million, a 174 percent increase compared to the quarter ended December 31, 2015, driven primarily by pre-commercialization costs, increased headcount as the company was preparing for potential commercialization of solithromycin and severance related to the retirement of our former chief executive officer.

Financial Results for the Year Ended December 31, 2016

For the year ended December 31, 2016, Cempra reported a net loss of $118.0 million, or $2.34 per share, compared to a net loss of $91.1 million, or $2.09 per share, for the year ended December 31, 2015.

Research and development expense was $81.7 million, a decrease of 12 percent compared to the year ended December 31, 2015. The decrease was primarily due to the decrease of clinical trial expenses for solithromycin and the purchase of API in 2015 in anticipation of the launch of solithromycin. General and administrative expense was $53.5 million, a 134 percent increase compared to the year ended December 31, 2015, driven primarily by pre-commercialization costs, increased headcount as the company was preparing for the potential commercial launch of solithromycin.

As of December 31, 2016, Cempra had cash and equivalents of $231.6 million and 52.4 million shares outstanding.

Our corporate restructuring was implemented to enable us to conserve our financial resources.  As a result of the restructuring, we expect our research and corporate expenses to trend significantly downward beginning in the second quarter of this year and we expect to reduce second half 2017 expenses by more than  70 percent compared to the second half of 2016.  These operating expense assumptions do not contemplate the costs associated with a commercial launch of solithromycin or any additional clinical trials with any of our product candidates. Future discussions with regulatory authorities and agreement on further clinical development requirements may lead to additional expense and we would expect to provide more granular expense guidance at that time. (Original Source)

On the ratings front, Cempra has been the subject of a number of recent research reports. In a report released yesterday, Roth Capital analyst Michael Higgins reiterated a Buy rating on CEMP, with a price target of $8, which represents a potential upside of 90% from where the stock is currently trading. Separately, on January 12, J.P. Morgan’s Jessica Fye maintained a Hold rating on the stock .

According to, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Michael Higgins and Jessica Fye have a yearly average loss of -10.9% and -12.8% respectively. Higgins has a success rate of 36% and is ranked #4327 out of 4504 analysts, while Fye has a success rate of 38% and is ranked #4228.

Overall, 2 research analysts have rated the stock with a Sell rating, 8 research analysts have assigned a Hold rating and 2 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $2.25 which is -46.4% under where the stock closed yesterday.

Cempra, Inc. engages as a clinical-stage pharmaceutical company, which focuses on the development of antibacterials to meet critical medical needs. Its products include; Solithromycin and Taksta. 

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