Tetraphase has two suitors, despite struggling market for antibiotics
The market for antibiotics may be “broken,” but one small antibiotic company is seemingly in demand: Tetraphase Pharmaceuticals. In March, the company said it had agreed to be acquired by AcelRx in an all-stock deal valued at $14.4 million. But this week, another drugmaker appears to be courting Tetraphase — La Jolla Pharmaceuticals submitted a non-binding proposal to swallow Tetraphase for $22 million.
At the heart of either deal is Tetraphase’s antibiotic eravacycline (branded as Xerava), which was approved in 2018 for complicated intra-abdominal infections, some four years after the company reported its first batch of pivotal trial data. Last year, the drug generated a mere $3.6 million in net sales.
Akin to AcelRx, La Jolla is also 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.
La Jolla, which has an approved drug for septic or other distributive shock and another therapy under FDA review for malaria, has $77.2 million of cash which it plans to use to fund the transaction, it said in a filing.
Tetraphase investors cheered the deal — shares of the Watertown, Massachusetts-based company soared more than 56% to $2.12 in Thursday premarket trading.
The AcelRx deal was approved by both sets of shareholders and is expected to close in the second quarter. La Jolla said its deal could be completed by May 11, subject to due diligence.
Tetraphase, like peers Achaogen and Melinta, has seen its value go up in smoke as feeble sales frustrated growth, as doctors who are confined by hospital budgets are steered to use older, cheaper antibiotics in their first response, reserving fresh, more targeted alternatives for acute cases.
The industry players contributing to the arsenal of antimicrobials are fast dwindling, and the pipeline for new antibiotics is embarrassingly sparse, the WHO has warned. Drugmakers are enticed by greener pastures, compared to the long, arduous and expensive path to antibiotic approval that offers little financial gain as treatments are typically priced cheaply, and often lose potency over time as microbes grow resistant to them.
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 announcement comes months after bankrupt antibiotic company Aradigm turned to old partner/investor Grifols for a final $3 million fire sale.