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Trius Therapeutics Remains One Of Our Best Ideas

By Jason Napodano, CFA

On May 7, 2013, Trius Therapeutics (TSRX) reported financial results for the first quarter 2013. Total revenues in the quarter were $1.727 million, and consisted of $0.529 million in contract research from the company's government grants and $1.198 million collaborative and licensing fees from Bayer Pharma AG, the company's partner in Asia/Pacific market for tedizolid phosphate. Revenues were in-line with expectations. Net loss in the quarter totaled $17.3 million, or 38 cents per share.

Cash as of March 31, 2013 stood at $83.8 million. Now that the phase 3 program for tedizolid in ABSSSI has been successfully completed, we see significant potential for non-dilutive cash through the forming of a commercialization partnership in the European Union. We believe a transaction can get done later in 2013.

To download a copy of our full report, click this link: TSRX/May7-Napodano.pdf

Trius remains one of our best ideas in the small-cap biotechnology area, offering investors low development and regulatory risk with potential high investment returns over the next twelve to eighteen months. We believe investors should establish a position in the stock at today's price given the attractive long-term value and potential for meaningful upside in the shares on the signing of a European partnership for tedizolid.

We believe the commercial opportunity for Trius' tedizolid is significant, at roughly $750 million worldwide. We see the story as mostly derisked, given the positive and consistent results from the two phase 3 studies, ESTABLISH-1 and ESTABLISH-2, that show tedizolid is non-inferior to Pfizer's (PFE$1.3 billion drug, Zyvox (linezolid). We believe tedizolid can gain meaningful market share after commercialization based on superior dosing, safety, tolerability, and potentially improved efficacy in a growing number of vancomycin and linezolid-resistant strains.

Trius plans to file the U.S. NDA application during the second half of 2013. We see $12 as fair-value and believe the name is low risk / high reward at this level.

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Follow Jason on Twitter: @JNapodano