Why Cempra Inc Shares Fell Today

By Markets Fool.com

Continue Reading Below

What: Shares ofCempra Inc,a clinical-stage pharmaceutical company with a focus on creating products for antibiotics-resistant bacteria, fell as much as 10% today after reporting second quarter earnings.

So what: Revenue during the quarter came in at $5.1 million, which was ahead of the $4.6 million that analysts were expecting. However, the net loss for the quarter came in at $0.57 per share, which was worsethan the $0.42 that was expected due to soaring expenses related to running its Soltaire-IV clinical trial and the spending needed to prepare the company for commercialization.

Now what: Cempra has completed enrollment for its phase 3 study ofsolithromycin, its lead compound, and expects toannounce top line results by the end of the year. Drug resistant bacteria is becoming a big problem for the healthcare system, so if Cempra can successfully commercialize its drug it could prove to be a huge opportunity for the company. Analysts believe that peak sales for the drug could reach $2 billion worldwide.

Shares of Cempra have been on a monster run this year, up more than 75% since the start of the year, so it's no surprise to see the stock fall after reporting disappointing earnings results. However, an increase in spending to prepare for commercialization should probably be viewed as a good thing, and with $202 million in cash on the balancesheet the company appears to have plenty of capital to support an increase in spending without needing to tap the market for additional funds. If you were bullish on Cempra's long-term prospects before this earnings report was released, I see no reason to change your view based on today's price movement.

The article Why Cempra Inc Shares Fell Today originally appeared on Fool.com.

Continue Reading Below

Brian Feroldi has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.