Why Does this Analyst Slash His Price Target in Half — Right Before Launch of Paratek Pharmaceuticals’ (PRTK) Drug NUZYRA?

Paratek Pharmaceuticals (PRTK) is preparing to launch its drug NUZYRA, following FDA approval granted on October 2nd. The medication treats both community-acquired bacterial pneumonia (CABP) and acute bacterial skin and skin structure infections (ABSSSI). The drug is set to be launched in February of 2019. H.C. Wainwright’s analyst Ed Arce affirms his Buy rating, but significantly reduces the price target from $55 to $22. (To watch Arce’s track record, click here)

First, let’s talk about the progress: Paratek’s fresh launch product is nearing completion, the marketing team is accessing key payers in their outreach, the build-out of the sales management team is completed and the hiring of the sales force is underway. All of the points mentioned are reassuring, showing the drug is getting closer to actually selling. Now the team is working on generating demand for the medication, marketing it as the first-line therapy for ABSSI and CABP. The company says by the end of 2019, the plan is to have 80-85 sales specialists targeting around 800 institutions.

“We continue to view NUZYRA quite favorably given its many distinguishing and differentiating features, including bioequivalent IV to oral dosing, once daily administration, no clinical cases of clostridium difficile infections, no adjustments necessary for hepatic or renal impairment, demonstrated very low risk for drug-drug interactions (DDIs), and, we believe, a long established history of the tetracycline class providing physician comfort and ease with a novel, next-generation tetracycline as an alternative to both quinolones and beta-lactam combinations,” Arce said.

So why the price target reduction? Arce references the wholesale acquisition costs (WAC) for NUZYRA, which came out to $345 per IV dose and $197.50 per tablet – or $395 daily. “We believe this price reflects the reality that there are caps to what hospitals are willing to pay, while maximizing the balance necessary to achieve therapeutic value for the drug while encouraging more rapid formulary adoption, trial and usage,” Arce explained. Bottom line — the caps are going to affect how much the drug can actually sell for, thus affecting revenue.

It is yet to be seen what stock prices will look like after the launch, but those who are interested are mostly bullish. TipRanks found out of six analysts, five rated the stock a buy, while one was on the sidelines. The consensus price target stands at $25.66, showing a 259% upside from the current share price of PRTK. (See PRTK’s price targets and analyst ratings on TipRanks)

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