Cempra NASH drug or antibiotic?

I first got wind of Cempra ($CEMP) early last year when I was doing my annual review of all companies that had a nonalcoholic steatohepatitis (NASH) trial underway. I recently started diving into these companies to see if there were any gems that popped out - many had data due in Q4-2016. Yesterday, I hit my head as I saw that Cempra had recently gotten an adcomm recommendation and had failed to satisfy the FDA requirements for approval. A venture over to StockTwits had me in fits as the bulls and the bears discussed the potential of the drug. The comments were much more joyful to read than the press release given by the company. That being said, many missed what management was saying in both the press release and the  investor phone call.  

Cempra has been held back by this result by at least a year. Cempra will now have to show that Solithromycin does not in fact cause long-term liver damage. The thing that I found to be ironic about the new FDA requirement is that Solithromycin previously showed promising clinical data in 6 NASH patients. Solithromycin reduced the NAS score by more than 1 point for the small sample. Considering that NASH can lead to liver damage and that exposure to Solithromycin helped improve liver function (as measured by liver enzymes) contradicts an important point made by the FDA. I began to wonder, how can all six patients of a NASH trial respond positively, only to have the FDA use that same exact NASH trial as evidence against approval. 

In a press release dated, September 29th, 2016, Cempra management stated, "Compared with baseline values, after 90 days of solithromycin treatment, all six NASH patients had a reduction in their nonalcoholic fatty liver disease (NAFLD) activity score (NAS) (mean reduction, 1.3) and their alanine aminotransferase (ALT) (mean reduction, 17.8 U/L). Five of six patients had a reduction in their aspartate aminotransferase (AST), and the sixth patient had an AST that was unchanged and normal (mean reduction for the six patients, 10.1 U/L)." An FDA slide shown below contradicted that statement and showed that one patient had elevated ALT levels. 

Obviously we don't know for sure why the contradiction is there, but it is concerning considering that investors were led to believe that all patients responded well to Solithromycin when used as a NASH therapy. My prediction for the discrepancy is that the ALT elevation in the NASH patient was presented or became evident at a later date following the press release. Because of the concerns regarding liver toxicity we will keep Cempra on the back-burner for the treatment of NASH until we see more promising results. 

The Future of Solithromycin 

Management has made it clear that Solithromycin will likely not be approved before 2018. The FDA has mandated a further safety study in 9000+  Solithromycin treated patients. Considering the patient population is rather large, it could be that the FDA will require the safety data prior to marketing approval. We anticipate that Cempra will issue further FDA guidance when it becomes available. In the meantime, we can expect further updates from Cempra regarding its NASH study enrollment to occur in 1Q-2017. The update may come with its 2016 Earnings Call.