What: Shares of Cempra Inc (MLNT), a clinical-stage pharmaceutical company with a focus on creating products for antibiotics-resistant bacteria, fell as much as 10% today after reporting second quarter earnings.
So what: Revenue during the quarter came in at $5.1 million, which was ahead of the $4.6 million that analysts were expecting. However, the net loss for the quarter came in at $0.57 per share, which was worse than the $0.42 that was expected due to soaring expenses related to running its Soltaire-IV clinical trial and the spending needed to prepare the company for commercialization.
Now what: Cempra has completed enrollment for its phase 3 study of solithromycin, its lead compound, and expects to announce top line results by the end of the year. Drug resistant bacteria is becoming a big problem for the healthcare system, so if Cempra can successfully commercialize its drug it could prove to be a huge opportunity for the company. Analysts believe that peak sales for the drug could reach $2 billion worldwide.
Shares of Cempra have been on a monster run this year, up more than 75% since the start of the year, so it's no surprise to see the stock fall after reporting disappointing earnings results. However, an increase in spending to prepare for commercialization should probably be viewed as a good thing, and with $202 million in cash on the balance sheet the company appears to have plenty of capital to support an increase in spending without needing to tap the market for additional funds. If you were bullish on Cempra's long-term prospects before this earnings report was released, I see no reason to change your view based on today's price movement.
