Shares Of Tetraphase Tumble 26% Lower After FDA Guidance

On Thursday, shares of Tetraphase Pharmaceuticals (TTPH) (which was under pressure in the day's session, tumbling 7.5%), has fallen 26% in after-hours trading after the company provided an update about the FDA guidance. The company was seeking approval for its drug IV candidate eravacycline, but the FDA delivered some disappointing news that sent shares spiraling downward. 

The company reported that it was notified by the FDA that it would have to run an additional phase 3 trial in order to seek approval for eravacycline. The FDA said that Tetraphase can't submit an NDA for eravacycline until such another phase 3 trial is completed. This is an unhappy outcome, not because the candidate may never see approval, but because it will probably take 2 years for potential approval. 

This would significantly push back the timeline of approval for the drug candidate. The selloff in after-hours and the potential sell off in the morning is probably because some investors don't want to wait two years to see if the FDA will approve the drug or not. The company anticipates that it will start the trial in the fourth quarter of 2016 and have possible results by the fourth quarter of 2017. 

There are two problematic issues here. One is that the one-year time frame is an estimated timeline and doesn't account for patient recruitment which could possibly take longer. In addition, there is no way of knowing whether or not the company will hit its primary endpoint in this new trial. If it does, then it can file the NDA to the FDA for approval of eravacycline. Otherwise the company will be in a dire situation. Before the bad news, TTPH was already down almost 55% YTD. Eravacycline is Tetraphase's lead candidate, with just two other preclinical antibiotics in its pipeline.