Targanta Faces New Challenges to Raise Cash After FDA Shoots Down the Firm’s Antibiotic

12/10/08

Targanta Therapeutics (NASDAQ:TARG) faces an uphill journey now that the FDA has decided to not to approve the Cambridge, MA-based biotech firm’s antibiotic oritavancin. The FDA, in summary, told Targanta to conduct an additional clinical trial to show the safety and effectiveness of oritavancin before it seeks approval again. The drug is intended to treat antibiotic-resistant bugs, like the notorious MRSA.

After writing a brief post on the FDA’s decision yesterday, I caught up with Targanta CEO Mark Leuchtenberger a few hours later. He was his normal upbeat self, yet he did acknowledge that his company has quickly gone from one with a projected marketing launch date for oritavancin in 2009 to one that will instead have to focus resources on another late-stage clinical trial for the next one or two years before it can ask the FDA for approval a second time. The drug’s development timeline is critical to the company, because it is vying to become Targanta’s first moneymaking product on the market.

What’s more, the company needs to raise money to support further development of oritavancin in a harsh financial climate to fund the clinical trial. How much? Leuchtenberger says he won’t know until the FDA provides guidance on the size and scope of the trial. The company finished September with $42.6 million in the bank, and Leuchtenberger tells me that money will fund the company in its current form into the third quarter of 2009.

“We knew [before the FDA's recent decision on oritavancin] we had a hefty challenge in front of us in what is a difficult fundraising market,” Leuchtenberger says. “We actually think that there will be interest and there has been interest in investing [in Targanta].”

Leerink Swann analyst Howard Liang wrote in a note to investors yesterday that there were already uncertainties in the market for antibiotics to combat MRSA due to a likely generic drug challenge for for a big brand-name antibiotic, daptomycin (Cubicin)—made by Lexington, MA-based Cubist Pharmaceuticals (NASDAQ:CBST). “In an already difficult capital market environment,” Liang writes, “this uncertainty makes it more difficult for financing the additional Phase 3 trial [for oritavancin].”

Leuchtenberger says his firm will also need to “take the appropriate steps” to ensure that it is using existing funds most appropriately, yet he declined to say which specific steps the company would take. (I think it’s safe to expect Targanta to cut at least some of the commercial workers it had hired in anticipation of the oritavancin launch in 2009, given that the company now has to focus its resources in the coming years on the next late-stage trial for oritavancin.)

Targanta had already expected to raise money for a late-stage trial next year of oritavancin in a single dose or less frequent doses than were given to patients in studies it used to apply for FDA approval. (In September Luke spoke to Leuchtenberger about the potential to treat patients with antibiotic-resistant germs with a single shot.) That study was supposed to take place as marketing began for oritavancin in more frequent doses. Leuchtenberger mentioned this study, but we didn’t discuss how the FDA response his firm got on Monday would impact plans for the single- or less frequent-dose trial of oritavancin.

After Targanta released the details of the FDA response late Monday night, the company’s stock predictably slid 40 percent yesterday, falling from $2.25 to $1.34 per share.

The FDA response followed an agency advisory committee’s 10-8 vote last month to recommend against approval of oritavancin.

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