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PropThink: ViroPharma's Strengthening Financial Profile & Pipeline Indicate Long-Term Upside

Thu, 12/27/2012 - 9:18am
The Associated Press

Shares of ViroPharma (NASDAQ:VPHM) have been pressured in 2012 (falling over 17% as of December 26), as generic competition for one of its drugs has eaten into sales and profits. And while generic competition is never a welcome sign for pharmaceutical companies, ViroPharma is poised to overcome the issue, due to a strengthening balance sheet, and a promising pipeline. Unless otherwise noted, financial statistics and management commentary used in this article is obtained from one of 3 sources: ViroPharma's Q3 2012 earnings release, its latest 10-Q filing, or its Q3 2012 earnings call.

Overview & Q3 2012 Results

ViroPharma, based in Exton, Pennsylvania, markets a number of drugs: Cinryze for the treatment of hereditary angioedema (HAE); Vancocin for clostridium difficile; and Buccolam, which is sold in Europe for the treatment of seizures. ViroPharma is also preparing to launch Plenadren in Europe for the treatment of adrenal insufficiency.

In its latest quarter, ViroPhrama posted revenues of $91.004 million, a steep drop from the $142.956 million in sales posted during the third quarter of 2011. The decline was due to generic versions of Vancocin entering the market in 2012. Vancocin sales dropped 95% year-over-year, highlighting the power that generics have in the marketplace. And sales of Cinryze have not yet risen fast enough to overcome the decline in Vancocin sales. During this latest quarter, Cinryze sales rose from $65.4 million in Q3 2012 to $85.3 million. The company posted a GAAP loss of 7 cents per share, but a non-GAAP profit of 10 cents per share, which removes non-cash expenses from the earnings calculation. ViroPharma burned $7,800 in operating cash flow during this quarter, but the company has $143.989 million in net cash & investments on its balance sheet, and I am confident in the company's ability to quickly return to GAAP profitability and operating cash flow. Continued growth in Cinryze sales and a strong pipeline are setting the stage for a strong 2013.

Cinryze: Expanding the Patient Pool

Cinryze treats hereditary angioedema (HAE), a rare inherited blood disorder that affects between 1 in 10,000 and 1 in 50,000 people in the United States. ViroPharma is forecasting that it will end 2012 with 900 patients in the United States, and the company is working to expand its patient pool even further, says CEO Vincent Milano:

The data points that we provided you in the past continue to remain consistent with roughly 50% of our new patients coming on after having previously tried anabolic steroids and roughly half of the new patients this year have been diagnosed in the last 3 years. Another important data point is that around 30% of our new patients coming on to Cinryze therapy have done so after trying one of the available acute HAE therapies. So in contrast to the theories that the acute HAE therapies would be drawing patients away from prophylaxis, the totality of the data actually suggests that prevention of attack is a preference for many people with HAE.

As the US Hereditary Angioedema Association states on its website, Cinryze is designed to prevent HAE attacks from occurring in the first place, whereas existing treatment options merely serve to treat attacks that have already taken place. That is what sets Cinryze apart in the market among HAE medicines, and recent clinical data has further strengthened Cinryze's competitive advantage. ViroPharma presented new safety data regarding Cinryze at the American College of Allergy, Asthma, and Immunology's meeting that showed that increased doses of Cinryze were well-tolerated in patients that were unable to adequately control their HAE with the standard dose of 1000 units every 3 to 4 days (Cinryze is created from human blood, and is therefore dosed in units). ViroPharma studied 20 patients over the course of 3 years, and escalated their Cinryze doses in a step-function, from 1000 units to 2500 units, in increments of 500 if patients continued to have more than 1 angioedema attack each month. A 3-month safety follow-up was conducted after each dosage increase. The safety study concluded that doses of up to 2500 units present no safety issues relative to existing clinical data, and that there were no discontinuations due to adverse events. There were 2 adverse events detected during the study that were determined to be related to Cinryze: a localized blood clot and a muscle spasm, but neither event was deemed serious enough by the investigators to warrant discontinuation of Cinryze. This study will allow ViroPharma to eventually expand its addressable market, as patients that do not respond to the standard dosage of Cinryze will be able to stay on the drug. Continue reading.

Click here to see this report at PropThink.com.

About PropThink

PropThink is an intelligence service that delivers long and short trading ideas to investors in the healthcare and life sciences sectors. Our focus is on identifying and analyzing technically-complicated companies and equities that are grossly over or under-valued. We offer daily market coverage, weekly feature stories, and a newsletter to investors who subscribe on PropThink.com. To learn more, follow us on Twitter or visit us at http://www.propthink.com.

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You should assume that as of the publication date of any report or letter, PropThink, LLC and persons or entities with whom it has relation ships (collectively referred to as "PropThink") has a position in all stocks (and/or options of the stock) covered herein that is consistent with the position set forth in our research report. Following publication of any report or letter, PropThink intends to continue transacting in the securities covered herein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. To the best of our knowledge and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and not from company insiders or persons who have a relationship with company insiders. PropThink was not compensated to publish this article. Our full disclaimer is available at  .

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