(VPHM) ViroPharma Going Strong

ViroPharma Inc. (VPHM) posted third quarter 2011 earnings (including special items) of 35 cents per share, surpassing the Zacks Consensus Estimate of 33 cents, but lower than the year-ago figure of 45 cents.

Excluding special items, but including stock based compensation expense, earnings came in at 52 cents per share for the third quarter, reflecting an increase of 8.3%. Higher revenues and lower share count helped boost earnings.


Higher sales from Cinryze helped improve quarterly revenues to $143.0 million, from $117.8 million reported in the year-ago quarter. Revenues also beat the Zacks Consensus Estimate of $131.0 million.

Cinryze sales increased 33.2% to $65.4 million during the reported quarter, and Vancocin sales came in at $76.6 million, reflecting an increase of 13.3%.

While the increase in Cinryze sales was due to higher patient demand, Vancocin sales were positively impacted by higher volume and price rise.

Other Details

Research and development (R&D) expenses soared 125.0% during the quarter to $23.0 million, given the upfront payment of $9.5 million related to the Halozyme Therapeutics, Inc. (HALO) and Intellect Neurosciences, Inc. (ILNS) licensing agreements and investments in Cinryze and VP-20621 clinical programs.

Selling, general and administrative (SG&A) expenses amounted to $31.4 million, up 25.5% year over year. The jump was primarily due to increased expenses related to the ongoing Cinryze marketing program in the US and the launch of the drug in the European Union (EU).

During the quarter, ViroPharma repurchased 5.5 million shares for $98.9 million, and completed its $150 million accelerated share repurchase program. Additionally, the company announced another $200 million share buyback program.

Forecast for 2011

For 2011, ViroPharma reiterated its Cinryze sales guidance of $250 – $260 million. The company expects steady patient growth to help achieve the sales target.

However, the guidance for expenses, both R&D and SG&A taken together, was increased to $185 – $195 million, from an earlier range of $180 – $190 million. The increase resulted from the additional upfront payment of $6.5 million related to the licensing deal with Intellect Neurosciences.

Pipeline Update

During the third quarter of 2011, ViroPharma launched Cinryze in the EU 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.

Moreover, during the quarter, ViroPharma initiated a mid-stage study of subcutaneous (SC) formulation of Cinryze. The study is designed to evaluate the safety, pharmacokinetics and pharmacodynamics of the SC formulation of Cinryze in combination with rHuPH20 (recombinant human hyaluronidase).

Additionally, the company received a Centralized Pediatric Use Marketing Authorization (PUMA) for Buccolam for the treatment of prolonged, acute, convulsive seizures in infants, toddlers, children and adolescents, aged 3 months to 18 years.

During the quarter, ViroPharma in-licensed worldwide rights to OX1 from Intellect Neurosciences. OX1 is being developed for the treatment of Friedreich’s ataxia (FA), a rare, hereditary, progressive neurodegenerative disease. ViroPharma plans to initiate a mid-stage study within 12 to 18 months after the completion of longer term toxicology studies. Additionally, the company intends to file for orphan drug designation on the basis of phase II proof of concept data.

DuoCort Pharma Acquisition

Along with second quarter financial results, ViroPharma announced that it has agreed to acquire DuoCort Pharma AB, a private Swedish company for $33.6 million. DuoCort Pharma is also eligible to receive $131 million on the achievement of certain milestones.

We believe that the acquisition of DuoCort Pharma will expand ViroPharma’s orphan disease commercial product pipeline, with the addition of Plenadren, being developed for treatment of adrenal insufficiency in adults.

The Committee for Medicinal Products for Human Use (CHMP) recommended the approval of Plenadren in July 2011. DuoCort Pharma anticipates EU approval of the candidate in the fourth quarter of 2011. We note that Plenadren has orphan drug designation in the EU.

We note that the closure of the deal, which is expected by the fourth quarter of 2011, is dependant on the approval of Plenadren in the EU.

Our View

We currently have a Neutral recommendation on ViroPharma. The stock carries a Zacks #3 Rank (Hold rating) in the short-run. We are pleased with Cinryze’s uptake in the US and expect investors to keep a close watch on the performance of the drug 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 is marketed in the US. The candidate is currently under review in the EU.

We believe that Dificid could turn out to be a major threat to Vancocin, which is currently not protected by any patent.

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