What follows is a mildly dense post … Sharing the details functions, in part, as a demonstration for the rationale behind the trade that we are going to put on; digest too the position of the entity relative to its development continuum and that shall additionally illuminate the Company selection for our trade. We will next follow this with a primer on the derivative strategy that we will put in place for Optimer Pharma, and on its heels will be the trade, in all its transparent glory to shine a light on whether we profit, or not, on the trade and this strategy in general.

Optimer Pharmaceuticals (NASDAQ: OPTR) is focused on discovering, developing, and commercializing innovative hospital specialty products that have a positive impact on society. The Company has two late-stage anti-infective product candidates, Fidaxomicin and Pruvel™ (prulifloxacin). Fidaxomicin is a narrow spectrum antibiotic being developed for the treatment of Clostridium difficile infection (CDI). In two Phase 3 trials, fidaxomicin was equally effective in clinical cure when compared to vancomycin, the only FDA approved product for CDI. Most importantly, fidaxomicin reduced the risk of recurrence by 47% compared to vancomycin. Pruvel™ is a prodrug in the fluoroquinolone class of antibiotics being developed as a treatment for infectious diarrhea. Optimer has also successfully completed two Phase 3 trials with Pruvel™.

Fidaxomicin, the lead product candidate, is a new antibiotic with a novel mechanism of action being developed for the treatment of Clostridium difficile infection or CDI, the most common nosocomial, or hospital acquired, diarrhea. OPTR believes that Fidaxomicin offers advantages over current treatments due to its demonstrated activity against C. difficile, low rates of recurrence, evidence of low C. difficile resistance, minimal systemic exposure, limited disruption of normally occurring gastrointestinal bacteria and convenient dosing regimen. Studies indicate that Fidaxomicin acts by inhibiting RNA polymerase, which results in the death of specific bacteria such as C. difficile. OPTR holds rights to fidaxomicin in all regions of the world except for Europe and certain other countries in the Middle East, Africa and the Commonwealth of Independent States.

In February 2011, OPTR entered into an exclusive collaboration and license agreement with Astellas Pharma, to develop and commercialize fidaxomicin in Europe and certain other countries in the Middle East, Africa and the CIS. In return for an exclusive license to fidaxomicin in the Astellas territory, Astellas paid to OPTR an upfront cash payment of $69.2M, and OPTR is eligible to receive additional cash payments totaling up to $168M upon the achievement of certain regulatory and commercial milestones. Furthermore, OPTR will be entitled to receive escalating double-digit royalties ranging from the high teens to low twenties on net sales of fidaxomicin in the Astellas territory, if approved. Astellas will be responsible for all future costs associated with the development and commercialization of fidaxomicin in the Astellas territory including the costs associated with the Marketing Authorization Application for fidaxomicin in Europe. In connection with the collaboration and license agreement, OPTR also entered into a supply agreement with Astellas pursuant to which OPTR will be the exclusive supplier of fidaxomicin to Astellas in the Astellas territory and Astellas is obligated to pay OPTR an amount equal to cost plus an agreed mark-up for such supply.

In July 2010, OPTR filed, and in August 2010 the European Medicines Agency accepted for review an MAA to permit marketing of fidaxomicin in Europe. In September 2010, OPTR began a submission to the FDA a rolling New Drug Application, and in November 2010 completed submission of the NDA. In January 2011, the FDA accepted the NDA filing for the treatment of CDI and for reducing the risk of recurrence when used for treatment of initial CDI. The FDA has also granted a request for six-month priority review, and has assigned a Prescription Drug User Fee Act, or PDUFA, goal date of 30 May 2011 for its review of the NDA. The FDA also informed OPTR that it plans to discuss the NDA at a meeting of its Anti-Infective Drugs Advisory Committee currently scheduled for 5 April 2011.

OPTR completed two fidaxomicin Phase 3 trials which showed that fidaxomicin achieved the primary endpoint of clinical cure and demonstrated a significantly lower recurrence rate and significantly higher global cure rate (defined as cure with no recurrence within four weeks of completing therapy) compared to Vancocin, the only FDA-approved antibiotic for the treatment of CDI. In the two Phase 3 trials, among subjects who had experienced a prior CDI episode and recurred within three months of entering the study, treatment with fidaxomicin resulted in a 47% reduction in repeat CDI recurrence compared to Vancocin (p=0.045). The data also indicated that treatment with fidaxomicin significantly improved the recurrence rate and global cure rate in CDI patients requiring concomitant antibiotics compared to Vancocin. Fidaxomicin was also well-tolerated in the trials. In February 2011, the New England Journal of Medicine published results from the first Phase 3 trial. OPTR also reported additional data from the second Phase 3 trial showing a clinically meaningful reduction in recurrence rates and higher global cure rates compared to Vancocin in both the hyper-virulent BI/NAP1/027 and the non-BI strain type subgroups. Clinical cure rates for fidaxomicin and Vancocin were similar in these two strain type subgroups.

On 5 April 2011 OPRT announced that the FDA’s Anti-Infective Drugs Advisory Committee (AIDAC) recommended that the FDA approve Optimer’s investigational antibiotic DIFICID™ (fidaxomicin) for the treatment of patients with Clostridium difficile infection (CDI), a bacterial infection in the lining of the gut that can cause severe diarrhea, colitis and in some cases death. In a unanimous 13-0 decision, the AIDAC found that the clinical evidence submitted by Optimer demonstrated the safety and effectiveness of DIFICID for the treatment of CDI.

The FDA is not bound by the committee’s guidance but takes its advice into consideration.

“We view the vote of the FDA’s panel of expert advisors, with diverse backgrounds ranging from infectious disease to biostatistics, as a strong endorsement for approving DIFICID for the treatment of CDI. We are encouraged that the advisory committee recognizes the urgent need for new treatment options for CDI and the seriousness of the increasing incidence of these infections,” said Pedro Lichtinger, President and CEO of Optimer. “We are proud to be one step closer to providing patients, healthcare providers and physicians with a new treatment option for CDI, a serious and debilitating disease that can impact every aspect of a patient’s life.”

On 6 April 2011 OPTR and Cubist Pharmaceuticals (NASDAQ: CBST) an exclusive two-year co-promotion agreement to market DIFICID™ (fidaxomicin), in the United States. Under the terms of the agreement, OPTR and Cubist will co-promote DIFICID to physicians, hospitals, long-term care facilities and other healthcare institutions in the United States. OPTR and Cubist will also jointly provide medical affairs support for the product. Optimer plans to strategically build its sales force and medical affairs team. OPTR’s team will be complemented by Cubist’s existing U.S. hospital sales force and medical affairs team which is already dedicated to the antibiotic space for CUBICIN®, Cubist’s therapy for Staphylococcus aureus bacteremia, including right-sided endocarditis, and complicated skin infections caused by certain Gram-positive bacteria, including MRSA.

The agreement expires two years from the first commercial sale of DIFICID. The agreement can be renewed for additional terms upon agreement of the parties and can be terminated early by either party in certain defined situations. OPTR will be responsible for the manufacturing and distribution of DIFICID in the United States and for recording product revenue. OPTR will be responsible for obtaining FDA approval, and will retain ownership of the New Drug Application. For its efforts under the co-promotion agreement, including providing specified levels of resources and activities, Cubist will receive quarterly service fees of $3.75M ($15M/year) over the two years beginning with the first commercial sale of DIFICID. Cubist is also eligible to receive an additional $5M in the first year after first commercial sale and $12.5M in the second year of the agreement if mutually agreed upon annual sales targets are achieved, as well as a portion of OPTR’s gross profits from any sales above the specified annual sales target levels.

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