ViroPharma Inc. (VPHM) posted second quarter fiscal 2011 earnings of 36 cents per share, missing the Zacks Consensus Estimate by 3 cents and the year-ago figure by a penny. Despite higher revenues, earnings bore the brunt of increased operating expenses.
Revenues
Higher sales from Cinryze boosted the quarterly revenues from $109.0 million in the year-ago quarter to $128.8 million. However, revenues fell shy of the Zacks Consensus Estimate of $131.0 million.
Cinryze sales increased 55.1% to $62.5 million during the reported quarter, while Vancocin sales came in at $65.2 million, reflecting a slide of 4.7%.
The increase in Cinryze sales was due to higher patient demand. On the other hand, Vancocin sales were negatively impacted by declining volume, partly offset by price rise.
Other Details
Research and development (R&D) expenses soared 121.7% during the quarter to $20.4 million, given the upfront payment of $9 million related to the Halozyme Therapeutics, Inc. (HALO) agreement, which is discussed later, and investments in Cinryze and VP-20621 clinical programs.
Selling, general and administrative (SG&A) expenses amounted to $32.1 million, up 26.3% year over year. The jump was primarily due to increased expenses related to the ongoing Cinryze marketing program in the US and potential launch of the drug in the European Union (EU).
During the quarter, ViroPharma repurchased 2.7 million shares for $50 million, under its accelerated share repurchase program.
Forecast for 2011
For 2011, ViroPharma raised the lower end of its Cinryze sales guidance by $5 million and now expects Cinryze sales in the range of $250 – $260 million (previous guidance: $245 – $260 million). The company expects steady patient growth to help achieve the sales target.
The lower end of the guidance for expenses, both R&D and SG&A taken together, was also increased to $180 – $190 million, from a range of $170 million – $190 million. The new guidance range includes the impact of the Halozyme collaboration agreement.
Pipeline Update
During the second quarter of 2011, the European Commission (EC) granted Centralized Marketing Authorization to Cinryze for the treatment of hereditary angioedema (HAE).
Cinryze is currently marketed in the US for preventing angioedema attacks in adolescent and adult patients with HAE.
Further, during the quarter, ViroPharma entered into a global licensing deal with Halozyme, for using the latter’s rHuPH20 (recombinant human hyaluronidase) for the development of a subcutaneous formulation of Cinryze. The subcutaneous formulation is expected to enter mid-stage studies in the second half of 2011.
Additionally, the company received positive recommendation from the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) for Buccolam (acquired in May 2010 with the acquisition of Auralis Limited). ViroPharma is seeking approval for Buccolam, to be used as a treatment for prolonged, acute, convulsive seizures in infants, toddlers, children and adolescents, from three months to less than 18 years.
The EC’s decision on ViroPharma’s Pediatric Use Marketing Authorization (PUMA) for Buccolam is expected in the third quarter of 2011.
Our View
We currently have a Zacks #3 Rank (short-term Hold rating) on ViroPharma. We are pleased with Cinryze’s uptake in the US and expect investor focus to remain on how the drug fares in the EU.
However, we are concerned about Vancocin (approved for the treatment of clostridium difficile infection), which faces competition from Optimer Pharmaceuticals Inc.’s (OPTR) Dificid (fidaxomicin), which was recently launched in the US. The candidate is currently under review in the EU.
Certain late-stage studies demonstrated that Dificid was non-inferior to Vancocin in achieving clinical response and was superior over Vancocin in sustaining clinical response through 25 days post treatment. These superior recurrence benefits of Dificid over Vancocin are to be included in the drug’s label.
We believe that the approval/launch of Dificid could turn out to be a major threat to Vancocin, which is currently not protected by any patent.
Longer-term, we have an Outperform recommendation on ViroPharma.
