Optimer Rides Investment See-Saw With Promising Drug for “C.diff” Infections

6/5/09Follow @xconomy

Biotech investing can sometimes be a downright confusing game, even for people who are supposed to know what they are talking about. Ask the folks at San Diego-based Optimer Pharmaceuticals (NASDAQ: OPTR).

Optimer has been one of a few bright spots in biotech over the past year. Back in November, its lead drug candidate, an antibiotic for C.difficile bacterial infections that cause horrific and potentially fatal cases of diarrhea, reached its main goal in a clinical trial of 600 patients. It was slightly better than the standard vancomycin antibiotic at curing patients, and was significantly better at preserving healthy bacteria in the gut that protect people suffering a relapse. It’s the first new treatment against this pathogen in decades, and it’s about to hit the market right when public health officials are freaking out about fast-rising incidence of “C. diff” in U.S. hospitals. The statistical analyses left no doubt that this drug was working.

Optimer discussed this data in significant detail six months ago, but more complete data were presented on Sunday, May 17, at a medical meeting in Helsinki, Finland. Not much was really new, except for one tidbit about a subpopulation of patients with an especially virulent form of “C.diff” infection known as BI or NAP1/027. The Optimer drug, fidaxomycin, was no better than standard vancomycin at preventing recurrences. About one-third of all patients who get “C.diff” have this especially aggressive form.

So how did the market react to this news? It shot first and asked questions later.

Shares of Optimer closed at $11.60 the last day of trading before the Helsinki presentation. The next day of trading, analysts from Needham & Co., JMP Securities, and Ladenburg Thalmann all downgraded their ratings on the stock. Shares plummeted as much as 18 percent during the day, to as low as $9.54 on heavy volume, as investors followed their interpretation of the bad news.

Then things got weird. Two days later, Ladenburg Thalmann changed its mind, and upgraded the stock again to “Buy.” All those investors who ran for the exits in fear suddenly looked kind of foolish, as the stock regained all those losses and more, closing at $12.28. Since then, Optimer has done nothing but climb even higher, closing yesterday at $13.84—a whopping 19 percent gain since the supposedly negative results came out in Helsinki. Not bad for an obscure stock that was trading for less than $5 back in early November.

What’s going on here? That was the gist of my questioning a couple weeks ago when I spoke to Optimer’s chief financial officer, John Prunty, and chief commercial officer Kevin Poulos.

A lot of people were essentially confused … Next Page »

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