Cempra (CEMP): Cutting PT On Offering Dilution, Not Fundamentals - Jefferies

Cempra (NASDAQ: CEMP) Jefferies analyst, Eun Yang, reiterated her Buy rating on shares of Cempra, Inc. (NASDAQ: CEMP) after a lower 2Q16 net loss of ~$25M on lower R&D. Current estimated cash of ~$280M sufficient through 2017 per CEMP.

The analyst continues to view its lead antibiotic Solithera as an attractive asset (a macrolide backbone of respiratory infections) with a high likelihood of FDA approval by YE16 & a potentially lucrative ex-U.S./Japan partnership in 2017, the analyst sees upside potential at current EV of ~$600M.

CEMP is actively engaged in ex-U.S. partnership discussions for Solithera (solithromycin), while open to various options. CEMP notes it's looking at a variety of partners (e.g., worldwide, European, regional); a deal could potentially be structured to include other Solithera indications (e.g., urethritis, NASH). The analyst now expects an ex-U.S. partnership (ex-Japan) in ~2H17 vs. 4Q16 previously (thus, pushing back an assumed $150M upfront payment to 2017).

The price target was cut to $40.00, from $42.00, due to a dilutive ATM stock offering. The ~4.1M shares sold represents ~8% dilution (vs. 1Q16 shares of 47.9M). Dilutive effect was offset by lower R&D expense estimates in 2016+ following completion of Ph3 CABP trials for Solithera.

For an analyst ratings summary and ratings history on Cempra, Inc. click here. For more ratings news on Cempra, Inc. click here.

Shares of Cempra, Inc. closed at $18.50 yesterday.

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