As Antibiotics Stop Working, Five Biotechs Seek Cures

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One of the main concerns physicians have agreed upon in recent years has been the overuse of antibiotics by some health care professionals. Their overuse in some cases has led many of the major conditions and infections that require such treatment to become drug resistant. In other words, they aren’t working.

Because new drug development is expensive, and potent antibiotics can be reserved to ensure efficacy when needed and to mitigate development of resistance, many large pharmaceutical companies discontinued antibiotic development programs.

In a new research report, the Merrill Lynch biotechnology team focuses on the companies that have made antibiotic research and development their priority. Not only is this good for the patients that will need them, it may lead some large pharmaceutical companies to their door with an acquisition or merger offer.

Here are five companies that are leading the way for a new generation of antibiotics that are not drug resistant by infections.

Cubist Pharmaceuticals Inc. (NASDAQ: CBST) has used acquisitions to bolster its outstanding portfolio of antibiotic drugs over the years, and now it could be a target. The company also has four Phase 3 pipeline products in development, which could boost sales and earnings dramatically. If the Phase 3 trials for CXA-201 prove successful, many Wall Street analysts see a large potential upside from current valuation.

Cubist is also a stock that was believed to be a buyout target in recent years, but it decided to be an acquirer instead. The Merrill Lynch price target for this outstanding Buy-rated stock is $84. The Thomson/First Call target is set at $82.33. Cubist closed Thursday at $68.55 a share.

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Durata Therapeutics Inc. (NASDAQ: DRTX) is a pharmaceutical company focused on the development and commercialization of new therapeutics for patients with infectious diseases and acute illnesses. Its approved drug Dalvance is the first and only type IV antibiotic approved for the treatment of acute bacterial skin and skin structure infections (ABSSSI) with a two dose regimen of 1,000 mg followed one week later by 500 mg, each administered over 30 minutes.

Dalvance demonstrates bactericidal activity in vitro against a broad range of bacteria, such as Staphylococcus aureus (including methicillin-resistant strains) and Streptococcus pyogenes, as well as certain other streptococcal species. Durata is rated Buy at Merrill Lynch with a $22 price target. The consensus target is $21.56. The stock closed on Thursday at $16.73.