ViroPharma Inc. (VPHM) posted first quarter fiscal 2011 earnings of 44 cents per share, beating the Zacks Consensus Estimate by 4 cents and the year-ago figure by 15 cents. Higher product sales helped boost earnings.


Quarterly revenues of $127.0 million beat the Zacks Consensus Estimate of $122 million and were 40.1% above the year-ago revenue of $90.6 million. Revenues were spurred by higher sales of Cinryze and Vancocin.

Cinryze sales increased 62% to $57 million during the reported quarter while Vancocin sales came in at $69 million, reflecting a 24% rise.

The increase in Cinryze sales was due to higher patient demand while price and volume increases prompted Vancocin sales.

Other Details

Research and development (R&D) expenses increased 7.2% during the quarter to $10.4 million given Cinryze and VP-20621 clinical programs.

Selling, general and administrative (SG&A) expenses amounted to $28.3 million, up 35.4% year over year. The jump was primarily due to increased marketing and medical education expenses, higher patient support costs and expenses related to building the European organization, as ViroPharma plans to launch two drugs in the EU in 2011.

During the reported quarter, ViroPharma repurchased 2.4 million shares under its accelerated share repurchase program.

Forecast for 2011

For 2011, ViroPharma raised the lower end of its Cinryze sales guidance by $10 million and now expects Cinryze sales in the range of $245 – $260 million (old guidance: $235 – $260 million).

The guidance for expenses, both R&D and SG&A taken together, remained unchanged at $170 million – $190 million.

Pipeline Update

During the first quarter of 2011, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) recommended the approval of Cinryze, as a treatment for hereditary angioedema (HAE) in adolescents and adults.

We expect investor focus to remain on the European approval and launch of Cinryze, anticipated in second quarter 2011.

Cinryze is currently marketed in the US for preventing angioedema attacks in adolescent and adult patients with HAE.

ViroPharma also initiated a mid-stage trial of Cinryze as a treatment of acute antibody-mediated rejection (AMR) in recipients of donor-specific cross-match positive kidney transplants.

Further, the company plans to initiate a phase III trial of a subcutaneous formulation of Cinryze for HAE in the second half of 2011.

ViroPharma plans to initiate a mid-stage trial of VP-20621 for recurrent clostridium difficile infections in the second quarter.

Additionally, the company is evaluating Buccolam (acquired in May 2010 with the acquisition of Auralis Limited) as a treatment for pediatric epilepsy in Europe. ViroPharma submitted the Pediatric Use Marketing Authorization application to the EMA last year and expects to gain approval and eventually launch the drug in the second half of 2011.

Our View

We currently have a Neutral recommendation on ViroPharma, which is supported by a Zacks #3 Rank (short-term Hold rating). We are pleased with ViroPharma’s first quarter 2011 financial results.

However, Vancocin, which is one of the primary revenue contributors at ViroPharma, is not protected by any patent. Vancocin generics are yet to hit the market with the FDA requiring generic companies to conduct a bioequivalence study to gain approval for their versions. We note that a proposed bioequivalence method for Vancocin is filed for approval with the FDA. If the method gets the regulatory body’s nod, the time required for a generic manufacturer to get a copycat version of Vancocin approved will be reduced and multiple generics may enter the market, thereby leading to significant sales erosion of the drug.

Moreover, Vancocin could face competition from Optimer Pharmaceuticals Inc.’s (OPTR) Dificid (fidaxomicin), which is currently under regulatory review in the US, with a decision expected in May 2011.

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