Why Cempra Inc. Got Crushed Again

By Brian OrelliMarketsFool.com

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What happened

After falling 21% on Friday following the announcement of delays due to issues at its contract manufacturer, Cempra (NASDAQ: CEMP) fell another 61% today after the U.S. Food and Drug Administration released briefing documents expressing concerns over the safety of Cempra's lead pneumonia antibiotic, solithromycin.

So what

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Specifically the FDA is worried about potential liver damage, which is measured by liver enzyme levels. Two patients discontinued the drug due to elevated liver enzyme levels, although the FDA notes that "elevations in the majority of patients appeared to be asymptomatic and generally transient."

Cempra's biggest problem appears to be that the longer patients are treated with solithromycin, the more likely they are to experience liver damage, suggesting that the signal is real. Of the two phase 3 trials, the one with the longer exposure had an increased incidence of elevated liver enzymes. And when Cempra tested solithromycin as a treatment to reduce airway inflammation in patients with the lung disease COPD for 28 days, three of the four patients had elevated liver enzymes.

All told, the FDA review sums things up in a less-than-stellar way for Cempra: "We conclude that these findings comprise a genuine liver injury signal."

Now what

The FDA's Antimicrobial Drugs Advisory Committee meeting is scheduled for Friday, when outside experts will look at the FDA's conclusions and Cempra's explanation and give their opinions of the data. There are risks with every drug, so the main issue will be whether the need for new antibiotics justifies the added potential risk of liver damage.

Keep in mind that the FDA has the final say, so even if the committee recommends approval of solithromycin, the agency could still give it a thumbs-down.

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Brian Orelli and The Motley Fool have 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.