Recently, Theravance (THRX) received a milestone payment of $20 million from its partner Astellas Pharma. The payment follows the U.S. Food and Drug Administration (FDA) approval of Vibativ (telavancin) and for supplying Astellas Pharma with the launch inventory for the first commercial sale of the drug in the U.S. Vibativ is expected to hit the U.S. market by year-end.

Earlier, in September, Theravance received FDA approval to market Vibativ for the treatment of complicated skin and skin structure infections (cSSSI) caused by Gram-positive bacteria. While the drug will be marketed and sold by Astellas, Theravance will receive royalties on global sales. In the U.S. , the company will help Astellas in marketing the drug for the first three years post approval.

Apart from cSSSI, Vibativ is also being studied for hospital-acquired pneumonia [HAP]. The company has already submitted a New Drug Application (NDA) for this indication and has been assigned a Prescription Drug User Fee Act (PDUFA) date of Nov. 26. We believe a favorable decision from the agency will increase the patient base thereby improving the sales potential of the drug.

Although the Vibativ approval is a major achievement for Theravance, we remain concerned about competition from other drugs targeting Gram-positive bacterial infections. Vibativ will have to jostle for space against products like ViroPharma‘s (VPHM) Vancocin, Pfizer‘s (PFE) Zyvox and Tygacil. The drug will also have to fight off competition from pipeline candidates such as Johnson & Johnson‘s (JNJ) ceftobiprole and Forest Laboratories‘ (FRX) ceftaroline. We estimate an initial slow sales ramp of Vibativ. We have a Neutral rating on the stock.

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