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Optimer Pharma Evenly Poised

Zacks Equity Research

We are maintaining our Neutral recommendation on Optimer Pharmaceuticals (OPTR) with a target price of $14.00.

In March 2012, Optimer Pharma reported decent fourth quarter and full year 2011 results. The company earned 38 cents per share on an adjusted basis which compared favorably to the year ago loss of 31 cents and the Zacks Consensus Estimate of break-even earnings. Higher revenues led to the improvement. Revenues in the final quarter of 2011 included $11 million of net sales of Optimer Pharma’s first marketed product Dificid (up 3.7% sequentially). (Please refer to Revenues Rise at Optimer Pharma  for our detailed discussion on the earnings report).

We remind investors that Dificid, an antibiotic, was approved in the US in May 2011 for treating patients suffering from clostridium difficile-associated diarrhea (:CDAD). CDAD refers to the most common form of nosocomial, or hospital acquired, diarrhea. In December 2011, the drug was approved in the EU for CDAD under the trade name Dificlir. Dificlir will be launched in the EU by partner Astellas Pharma shortly. The drug is currently under priority review in Canada. Approval in additional territories will improve the sales potential of the drug.

Moreover, Optimer Pharma has an exclusive two-year agreement (through July 2013) with Cubist Pharmaceuticals (CBST) to co-promote Dificid in the US for the treatment of CDAD. We believe the deal is a positive for Optimer as it will benefit from Cubist Pharma’s experience in marketing hospital-based antibiotics. Optimer Pharma is looking to expand Dificid’s label into other indications.

However, we remain concerned about Optimer Pharma’s over dependence on Dificid for growth. In the absence of a decent pipeline, Optimer has little to fall back on if Dificid performs below expectations.

We see limited upside potential from current levels and hence retain our Neutral stance on the stock.

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