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Targanta Therapeutics: IPO Based on Oritavancin

Posted on: Wednesday, 30 May 2007, 06:00 CDT

Targanta Therapeutics has filed for an initial public offering of up to $86.3 million in order to commercialize its antibiotic oritavancin. The big question for investors will be whether the company is worth the risk given the checkered past of oritavancin and the fact that certain payments remain outstanding to the drug's originator, Eli Lilly.

Targanta has worked hard to secure confidence in oritavancin

US biopharmaceutical company Targanta is facing a significant number of competing candidates in the late stage pipeline for serious bacterial infections both in terms of pathogen coverage and site of infection: Methicillin-resistant Staphylococcus aureus (MRSA) and complicated skin and skin structure infections (cSSSIs) have respectively drawn significant interest from major antibiotics market players. As the antibiotics market has become increasingly genericized and restrictions placed on antibiotic usage in order to curb resistance, serious bacterial infections have afforded these players a potentially protected market niche.

Targanta has therefore had to work hard in order to secure sufficient confidence in order to push for its $86.3 million in funding to further its antibiotic portfolio. The company will be competing for attention against 15 other biotech companies waiting to price their IPOs. With a backdrop of 18 biotech IPOs already this year, bringing in an average of $45.7 million (according to BioWorld Snapshots), Targanta's expectations may be optimistic, but it is more likely to be aiming for a high start point, potentially to offset concerns about its lead candidate's history.

Oritavancin's checkered past largely circumstantial

Oritavancin's checkered past will have raised questions amongst investors about its commercial potential. Many of these concerns are largely answerable by the circumstances surrounding the drug's development, rather than being significantly worrying characteristics of the compound itself. However, as far back as 2002, InterMune had expected to file an NDA by the end of 2003. This had been put back until the end of 2004, due to adverse events. The FDA subsequently stipulated more data due to the inconsistencies in the data.

When Targanta relieved InterMune of the drug in 2005, it intended to spend three years trialing the drug prior to filing for an NDA in late 2007. However, this was stalled due to the fact that a change in manufacturer would require a bio-equivalence phase I trial prior to further development. All of this will have had an impact on the duration on the proportion of the drug's lifecycle that remains within the bounds of market exclusivity conferred by patent protection.

Strong competition and regulatory scrutiny ahead

Furthermore, oritavancin is competing with a significant number of products already on the market, including the already generic vancomycin, Zyvox (linezolid from Pfizer) and Cubicin (daptomycin from Cubist) and a number of pipeline candidates including Theravance's telavancin and Arpida's iclaprim. Nevertheless, its bacteriocidal activity is impressively rapid, and Targanta has demonstrated an in vivo activity approximately equal to that of vancomycin and Synercid. Furthermore, a significant advantage is likely to lie in its ability to inhibit VRE-caused endocarditis. Uses in these indications as a monotherapy would be preferable, although a combination use has not been ruled out.

The key to the drug's success therefore lies firmly in its presentation of outstanding trial results and its ability to tackle known areas of interest for regulatory bodies. All efforts are likely to be on reassuring regulators of the drug's safety. While it has been noted that the adverse events noted in previous trials had been associated with outsourced drug supplies, regulatory bodies cannot afford to take the risk that this is not the case.

Targanta may also be timing its IPO in advance of the FDA's decision on telavancin, slated for later on this year, given that Theravance's telavancin filing also relies on non-inferiority trials in cSSSI. This is an industry-wide dilemma regarding the FDA's stance on non-inferiority versus superiority trials. While Targanta has quoted multiple instances of the FDA agreeing to the company's appropriate use of non-inferiority trial design, last year it requested that Replidyne produce superiority data for faropenem in several indications, while an advisory panel made a similar request of Oscient Pharmaceuticals' Factive (gemifloxacin) in acute bacterial sinusitis.

Assuming oritavancin is approved without the need for further trials, Targanta's US commercialization plans may also attract some scrutiny. Although the company's management team of ten comprises five former Lilly executives, its own hospital directed sales force may need to be complemented by partnering or licensing deals. Given its royalty commitments to Lilly, this will reduce its own proportion of revenues further, and accordingly make it reliant on a subsequent broadening of use through additional indications. The company has plans for phase II trials for non-hospital use in cSSSIs (potentially valuable given the increasing number of community acquired MRSA skin infections), and a phase III trial in bacteremia planned for 2008.

These indications may prove more commercially attractive than its plans for the anthrax market. On May 24th, 2007, the company released findings from trial to determine the candidate's potential use in case of anthrax exposure. There may be a civilian demand for prophylaxis, or indeed post-exposure prophylaxis in the case of bioterrorist attacks such as those in 2001 when 22 cases of anthrax (including five deaths) were caused by the distribution of Bacillus anthracis spores via the US Postal Service. However, as with the more likely military need for such a product, B. anthracis responds effectively to several widely marketed oral products already available at much lower costs than a new branded product, and more readily administered than oritavancin's current intravenous formulation.

Confidence in commercialization plan key to investor support

In summary, Targanta's proposition for funding is relatively strong: it has a lead compound that demonstrates good potential for use in areas of high unmet need, and the company has succeeded where its predecessors have failed in terms of progression through clinical evaluation to regulatory assessment. However, it will still need to produce an eloquent and thorough evaluation of trial data to gain the approval of the FDA, which has proved fickle in its dealings with other companies producing similarly structured trial data as a foundation for market approval. The company will require a strong commercialization plan to maximize the drug's potential during its limited period of market exclusivity, and gain market support.

Source: Datamonitor

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