HCW starts Tetraphase at buy

H.C. Wainwright initiated coverage of Tetraphase Pharmaceuticals (NASDAQ:TTPH) with a “buy” rating and $15 price target. The stock closed at $6.88 on July 10.

Analyst Ed Arce writes that he expects a positive readout any day now in the company’s Phase 3 IGNITE4 trial of lead antibiotic drug, eravacycline, for the treatment of complicated intra-abdominal infection (cIAI).

“We initiate coverage with a simple thesis that Street expectations for approval of eravacycline are too low given a successful prior Phase 3 result,” he added.

Mr. Arce said many investors assume a low probability of success in the trial based on a failed trial in a different indication.

Tetraphase shares have lost 85% of their value since the IGNITE2 readout in Sept. 2015 of IV-to-oral eravacycline in complicated urinary tract infection (cUTI), and currently trade at a modest enterprise value of about $130-million, despite positive Phase 3 results in cIAI, a smaller but still meaningful market opportunity.

Mr. Arce said Tetraphase shares are poised for a re-rating with multiple potential stock catalysts in the current quarter, including positive IGNITE4 data, a European submission in cIAl and a path forward update on the oral formulation in cUTI. FDA approval and launch in cIAI is expected in the third quarter of 2018.