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Today’s Trading Edge: Cempra shares collapse after pneumonia medicine was rejected by FDA

Posted by WorldWideMarkets . on Dec 29, 2016 8:00:56 PM

WWM CEMP DEC 29TH 2016.jpg 

Cempra Inc. (SRPT) shares collapsed 57.38% to $2.60 after the CRL states that the FDA cannot approve the NDAs in their present form. 

The company announced that the company has received a Complete Response Letter (CRL) from the U.S. Food and Drug Administration (FDA) relating to the company's new drug applications (NDAs) for oral and intravenous solithromycin for the treatment of community-acquired bacterial pneumonia (CABP) in adults. The CRL states that the FDA cannot approve the NDAs in their present form and notes that additional clinical safety information and the satisfactory resolution of manufacturing facility inspection deficiencies are required before the NDAs may be approved.

The FDA did not request any further information on solithromycin efficacy for CABP in the CRL. To address this deficiency, the FDA is recommending a comparative study to evaluate the safety of solithromycin in patients with CABP. Specifically, the CRL recommends that Cempra consider a study of approximately 9,000 patients exposed to solithromycin to enable exclusion of serious drug induced liver injury (DILI) events occurring at a rate of approximately 1:3000 with a 95 percent probability. The CRL noted that while the FDA reserves comment on the proposed labeling until the NDAs are otherwise adequate, even in the absence of a case of Hy's Law or of another form of serious DILI in future studies, labeling will need to include adequate information about the potential for hepatotoxicity, limiting use to patients who have limited therapeutic options and limitations regarding duration of therapy.

Satisfactory resolution of these deficiencies is required prior to approval. Details on these deficiencies were not provided in the CRL. Cempra plans to request a meeting with the FDA as soon as possible to discuss the issues identified in the CRL, including the design of the recommended clinical safety study and the steps necessary to resolve the deficiencies noted at Wockhardt and Hospira. The company also plans to provide the FDA with an update on manufacturing progress at Uquifia, an alternate GMP manufacturing facility for solithromycin active pharmaceutical ingredient (API).

Price action on the CEMP daily chart shows that today’s dive invalidated a potential bullish ABCD pattern.  Point D was initially respecting the 161.8% Fibonacci expansion level of the $14.03 low to $26.95 high move.  If price is able to stay below the $3.00 level, we could see the a bearish move target the $2 handle. 

The Trade: Sell CEMP at $2.75, with a stop loss at $3.00 and a take profit at $2.00.  The Risk/Reward Ratio is 1:3

Topics: Stocks, Equities, US equities

 

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