Morgan Stanley Upgrades Cempra To Overweight

• Cempra Inc (NASDAQ: CEMP) shares are down 26 percent in the last three months, and are trading significantly below their 52-week high of $46.99.
• Morgan Stanley’s Andrew S Berens upgraded the rating on the company from Equal-weight to Overweight, while raising the price target from $25 to $38.
• Following the release of additional details on the data for solithromycin IV, external consultants indicated that the data appears approvable, Berens said.

Cempra has released additional details on the solithromycin IV data from the Solitaire-IV trial. The additional color suggests that the increased liver enzymes, or ALT, noted during the trial are transient in nature as well as reversible, without any additional indication of liver injury.

Analyst Andrew S Berens wrote, “In regards to the heart rate increases noted in this trial and during the QT study, we think there is still some question about the changes DURING the infusion and whether solithromycin causes mild QT prolongation, albeit less than moxifloxacin.”

External consultants with extensive regulatory experience have reviewed the data that has been released publicly, and believe that the probability of solithromycin being approved is high. “Despite a similar drug having an unfavorable regulatory past (Ketek), these consultants think the environment at the FDA has changed, resulting in an agency receptive to new antibiotics,” Berens added.

Morgan Stanley has increased its probability of success for oral solithromycin from 55 percent to 75 percent and for IV solithromycin from 40 percent to 70 percent.

“Our diligence on the commercial opportunities and development risks for Cempra's lead compound suggests the drug can be commercially successful. Outside of pneumonia, we see the drug gaining usage as an alternative to other macrolides,” Berens commented.