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Trius Therapeutics Remains One Of Our Best Ideas

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By Jason Napodano, CFA

On May 7, 2013, Trius Therapeutics (NasdaqGM: reported financial results for the first quarter 2013. Total revenues in the quarter were $1.727 million, and consisted of $0.529 million in contract research from the company's government grants and $1.198 million collaborative and licensing fees from Bayer Pharma AG, the company's partner in Asia/Pacific market for tedizolid phosphate. Revenues were in-line with expectations. Net loss in the quarter totaled $17.3 million, or 38 cents per share.

Cash as of March 31, 2013 stood at $83.8 million. Now that the phase 3 program for tedizolid in ABSSSI has been successfully completed, we see significant potential for non-dilutive cash through the forming of a commercialization partnership in the European Union. We believe a transaction can get done later in 2013.

To download a copy of our full report, click this link: TSRX/May7-Napodano.pdf

Trius remains one of our best ideas in the small-cap biotechnology area, offering investors low development and regulatory risk with potential high investment returns over the next twelve to eighteen months. We believe investors should establish a position in the stock at today's price given the attractive long-term value and potential for meaningful upside in the shares on the signing of a European partnership for tedizolid.

We believe the commercial opportunity for Trius' tedizolid is significant, at roughly $750 million worldwide. We see the story as mostly derisked, given the positive and consistent results from the two phase 3 studies, ESTABLISH-1 and ESTABLISH-2, that show tedizolid is non-inferior to Pfizer's (NYSE:(PFE - Analyst Report$1.3 billion drug, Zyvox (linezolid). We believe tedizolid can gain meaningful market share after commercialization based on superior dosing, safety, tolerability, and potentially improved efficacy in a growing number of vancomycin and linezolid-resistant strains.

Trius plans to file the U.S. NDA application during the second half of 2013. We see $12 as fair-value and believe the name is low risk / high reward at this level.

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Follow Jason on Twitter: @JNapodano
 

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