Gains In This Biotech Could Soon Become Infectious to Investors

The biotech sector can occasionally throw a curveball at investors. For Trius Therapeutics (NASDAQ: TSRX  ) shareholders, they were staring at a meaty fastball right down the heart of the plate yesterday morning.

Tedizolid mops the floor with its competition
Trius reported its late-stage results from its Establish 2 trial yesterday for Tedizolid -- its acute bacterial skin and skin structure infection, or ABSSSI, drug, which is also designed to treat methicillin-resistant staphylococcus aureus, or MRSA. MRSA is a highly infectious bacterial infection often contracted in hospitals, but also relatively treatable if caught early.

The results from Establish 2 only further established Tedizolid as a superior treatment for ABSSSI. Just as we saw in early and mid-stage trials, Tedizolid requires less dosing frequency and packed a bigger efficacy punch than Pfizer's (NYSE: PFE  ) Zyvox, which has been the kingpin of ABSSSI treatments up until now.

According to Trius' press release, Tedizolid met the primary endpoint of a greater than 20% decrease in lesion area size in a 48-hour to 72-hour period in 85.2% of instances compared with just 82.6% for Zyvox. Keep in mind, though, that the Tedizolid results were achieved after six days of treatment instead of the 10 days of treatment needed for Zyvox. Tedizolid met its secondary endpoints as well, including a sustained clinical response and an investigator assessment at the end of the therapy (usually seven to 14 days later). Even the adverse event profile of Tedizolid dipped compared to Zyvox, just 20.5% versus 24.8%. All evidence is now pointing to Trius filing for a new drug application in the U.S. and in Europe sometime in the second half of 2013.

Plenty of sales for Trius
An FDA approval of Tedizolid could have a number of implications. For one, it completely mopped the floor with Zyvox in trials, which could make Pfizer’s ABSSSI drug nearly obsolete, assuming it gains approval in both the U.S. and E.U. Considering that Zyvox brought in $349 million last year worldwide, Trius could quickly see sales soar beyond $200 million within the first year.

Second, it will make Forest Laboratories'  (NYSE: FRX  ) IV-based ABSSSI therapy, Teflaro, practically useless for treating ABSSSI. It's not like Forest Labs doesn't have enough issues at the moment, but sales of Teflaro have been disappointing at best, even with the additional indication of treating community-acquired bacterial pneumonia. Totaling just $11.5 million in total sales in the third quarter reported in January, Forest Labs' drug is administered via IV twice a day for a period of five to 14 days. Give a patient the option of a six-day oral medication versus up to 14 days of IVs and see which one they pick!

Before Trius shareholders start doing the jig in the streets, they should be aware that FDA and EMA approvals are never a given, and that it'll be sharing its revenue outside of the U.S., EU, and Canada with licensing partner Bayer (NASDAQOTH: BAYRY  ) . As you know, I’m more than happy to see a small clinical-stage biotechnology company sharing its revenue stream with a superior marketing team like Bayer because it should ultimately result in better sales.

Will investors catch the fever?
Still, I can't help but be excited with the prospects for approval, which is exactly the reason why I made a CAPScall of outperform on Trius back in December. With most biotech companies trading in excess of one-time peak sales estimates for their leading drug candidate, I can't help but stand back and admire Trius' paltry $332.6 million valuation when Zacks Investment Research analyst pegged peak global sales at $750 million in December. Simply put, Trius shares could easily double from these levels and still have modest room to run higher. That's the type of bullishness that I could see becoming easily infectious among investors!

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