ViroPharma Inc. (VPHM) posted fourth quarter 2010 earnings of 47 cents per share, beating the Zacks Consensus Estimate by 15 cents and the year-ago figure by 24 cents. In 2010, earnings increased 74.2% year over year to $1.62, beating the Zacks Consensus Estimate of 93 cents per share. Higher product sales helped boost earnings.
Quarterly revenues of $121.6 million beat the Zacks Consensus Estimate of $114 million and were 38.5% above the year-ago revenue of $87.8 million. Annual revenues at ViroPharma increased 41.4% to $439.0 million, beating the Zacks Consensus Estimate of $430 million.
Revenues were spurred by higher sales of Cinryze and Vancocin.
Quarterly Highlights
Cinryze sales increased 46% to $52.5 million during the fourth quarter, while Vancocin sales came in at $67.8 million, reflecting a 31% rise.
The increase in Cinryze sales was due to higher patient demand while price increases boosted Vancocin sales.
Research and development (R&D) expenses increased 17.2% during the quarter to $10.5 million given the Cinryze and VP20621 clinical programs.
Selling, general and administrative (SG&A) expenses amounted to $24.3 million, up 14.9% year over year, primarily due to increased marketing expenses, legal costs and compensation expense.
Expectations for 2011
For 2011, ViroPharma expects Cinryze sales to range from $235–$260 million. Expenses, both R&D and SG&A taken together, are expected to come in a $170–$190 million band.
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 2010 results. We expect investor focus to remain on the European approval and launch of Cinryze, anticipated in the first half of 2011.
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) fidaxomicin, which is currently under regulatory review in the US, with a target date set for May 30, 2011.
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