In a be­wil­der­ing twist to the long-suf­fer­ing mar­ket for an­tibi­otics — there has ac­tu­al­ly been a bid­ding war for an an­tibi­ot­ic com­pa­ny: Tetraphase.

It all start­ed back in March, when the mak­er of Xer­a­va (an FDA ap­proved ther­a­py for com­pli­cat­ed in­tra-ab­dom­i­nal in­fec­tions) said it had re­ceived an of­fer from Acel­Rx for an all-stock deal val­ued at $14.4 mil­lion.

The of­fer was well-timed. Xer­a­va was ap­proved in 2018, four years af­ter Tetraphase post­ed its first batch of piv­otal tri­al da­ta, and sales were nowhere near where they need­ed to be in or­der for the com­pa­ny to keep its head above wa­ter.

In the field of an­tibi­otics, ap­proval is on­ly the first hur­dle, the big­ger ob­sta­cle is al­ways go­ing to be reap­ing re­turns in the ‘bro­ken’ mar­ket for these life-sav­ing drugs. The long, ar­du­ous and ex­pen­sive path to an­tibi­ot­ic ap­proval typ­i­cal­ly of­fers lit­tle fi­nan­cial gain as treat­ments are typ­i­cal­ly priced cheap­ly and doc­tors — con­fined by hos­pi­tal bud­gets — are steered in­to us­ing old­er gener­ics in their first re­sponse, re­serv­ing fresh, more tar­get­ed al­ter­na­tives for acute cas­es.

Af­ter a healthy 49% se­quen­tial growth in sales the last quar­ter of 2019, in the fol­low­ing quar­ter, Xer­a­va sales grew a healthy 20% to $1.8 mil­lion, but the com­pa­ny con­tin­ued to re­port a loss. Giv­en the tra­jec­to­ry of the drug’s ex­pect­ed up­take, and the ex­pe­ri­ence of oth­er small an­tibi­ot­ic mak­ers (i.e. a litany of bank­rupt­cies), the road to prof­itabil­i­ty was more of a pipe dream than a mat­ter of pa­tience.

And so, like a knight in shin­ing ar­mor, Acel­Rx made its bid, to res­cue Tetraphase from the fire­sale that most of its peers were even­tu­al­ly sub­ject­ed to. Tetraphase agreed to the merg­er.

The deal made the­o­ret­i­cal sense, Acel­Rx sells a painkiller that is ad­min­is­tered in health­care set­tings such as hos­pi­tals, and Xer­a­va is an in­tra­venous an­tibi­ot­ic al­so pre­scribed in hos­pi­tal set­tings. “By com­bin­ing DSU­VIA and XER­A­VA net prod­uct sales un­der one stream­lined cost struc­ture, we be­lieve the com­bined com­pa­ny may re­al­ize both rev­enue syn­er­gies (ac­cess to more ar­eas across the hos­pi­tal to pro­mote both prod­ucts) as well as more ob­vi­ous cost syn­er­gies by re­mov­ing du­pli­ca­tion across op­er­a­tions, es­pe­cial­ly in sales and mar­ket­ing,” H.C. Wain­wright an­a­lyst Ed Arce wrote in a March note.

Then, in ear­ly May, an­oth­er drug­mak­er ap­peared to be court­ing Tetraphase: La Jol­la Phar­ma­ceu­ti­cals sub­mit­ted a non-bind­ing pro­pos­al to swal­low Tetraphase for $22 mil­lion.

Like Acel­Rx, the deal in­clud­ed of­fer­ing Tetraphase stock­hold­ers one con­tin­gent val­ue right (CVR), which would en­ti­tle the hold­ers to re­ceive ag­gre­gate pay­ments of up to $12.5 mil­lion for Xer­a­va in net sales mile­stones start­ing in 2021.

The in­cen­tive with the of­fer from La Jol­la, which has an ap­proved drug for sep­tic or oth­er dis­trib­u­tive shock and an­oth­er ther­a­py un­der FDA re­view for malar­ia, was the rough­ly $2 ex­tra mil­lion in cash up­front ver­sus Acel­Rx’s of­fer.

The Acel­Rx of­fer in March was an all-stock deal. But Tetraphas­es’ share $TTPH price had grown from $1.03 on March 13, the clos­ing price the week­day be­fore the Acel­Rx deal was made pub­lic, to $1.45 on May 7 when La Jol­la’s of­fer was un­veiled.

But Tetraphase had al­ready ef­fec­tive­ly got­ten en­gaged to Acel­Rx — ac­cord­ing to fil­ings, the com­pa­ny would be on the hook for a ter­mi­na­tion fee of $810,000 and/or re­im­burse Acel­Rx for cer­tain ex­pens­es up to $200,000. “We do not be­lieve La Jol­la’s un­so­licit­ed com­pet­ing bid is suf­fi­cient­ly com­pelling to Tetraphase to pull the com­pa­ny away from the cur­rent pro­posed trans­ac­tion, es­pe­cial­ly giv­en the amount of com­mit­ment and pre-close in­te­gra­tion with Acel­Rx to date,” Arce wrote in May.

And then, the plot thick­ened. Weeks lat­er, Melin­ta — a fel­low an­tibi­ot­ic mak­er fresh­ly re­struc­tured un­der Chap­ter 11 and now pri­vate­ly owned by Deer­field — of­fered to buy Tetraphase for $27 mil­lion. And so the game be­gan — Acel­Rx up­ping its of­fer prompt­ing Melin­ta to do the same, and rinse and re­peat. On Thurs­day, Acel­Rx bowed out of the mess, mak­ing a sweet $1.8 mil­lion as a break-up fee, and re­tain­ing the co-pro­mo­tion agree­ment for Xer­a­va and Dsu­via as a keep­sake.

Giv­en the way each deal was struc­tured, Acel­Rx’s last of­fer worked out to about a $35.3 mil­lion up­front deal, while the Melin­ta bid was in the re­gion of $39 mil­lion, ac­cord­ing to cal­cu­la­tions by Arce who called the fi­nal deal “more than fair” for Tetraphase share­hold­ers.

And fair it was — Tetraphase share­hold­ers cheered as the stock jumped about 23% to $2.61 in Fri­day morn­ing trad­ing.

Melin­ta should com­mence a ten­der of­fer for all Tetraphase shares by Mon­day, June 15 — and once the deal is con­sum­mat­ed add a fifth an­tibi­ot­ic to its drug ar­se­nal.

As it stands, the an­tibi­ot­ic mar­ket is cursed — it har­bors the stink of mul­ti­ple bank­rupt­cies, a dearth of in­no­va­tion and is con­se­quent­ly bare­ly whet­ting the vo­ra­cious ap­petites of ma­jor phar­ma­ceu­ti­cal com­pa­nies and most ven­ture cap­i­tal­ists. The Tetraphase deal comes months af­ter bank­rupt an­tibi­ot­ic com­pa­ny Ar­a­digm turned to old part­ner/in­vestor Gri­fols for a fi­nal $3 mil­lion fire sale. Melin­ta it­self filed for bank­rupt­cy in late 2019, on­ly to be swal­lowed by its lender Deer­field.

You don’t go more than 40 years in biotech without ever getting a product to market unless you can learn the art of writing a promotional press release. And Inovio captures the prize in baiting the hook.

Tuesday morning Inovio, which has been struggling to get its Covid-19 vaccine lined up for mass manufacturing, put out a release that touched on virtually every hot button in pandemic PR.

There was, first and foremost, an interim snapshot of efficacy from their Phase I program for INO-4800.