ViroPharma Beats; Raises Guidance - Analyst Blog

ViroPharma Inc. (VPHM) posted second-quarter earnings of 37 cents per share, beating the Zacks Consensus Estimate by 7 cents and the year-ago figure by 10 cents. Higher Cinryze and Vancocin sales and lower research and development expenses helped boost second quarter 2010 earnings.

Revenues

Quarterly revenues of $109 million were well above the Zacks Consensus Estimate of $96 million and 33% above the year-ago revenues of $82 million. Revenues were boosted by higher sales of Cinryze and Vancocin.

While Cinryze sales increased 58% to $40.3 million, Vancocin sales came in at $68.4 million, up 21%.

Sales of Cinryze (indicated for the prevention of swelling and painful attacks in teenagers and adults with hereditary angioedema) increased during the quarter due to increased patient demand, while sales of Vancocin (for the treatment of enterocolitis caused by Staphylococcus aureus) went up due to price increases.

Expenses

Selling, general and administrative (SG&A) expenses and research and development (R&D) expenses, taken together, declined during the quarter to $34.6 million from $36.1 million in the year-ago period.

Quarterly SG&A expenses increased 8% year over year as a result of a rise in compensation expense and marketing activities, while quarterly R&D expenses declined 26% due to the discontinuation of the maribavir prophylactic program.

Outlook

For fiscal 2010, ViroPharma raised its Cinryze sales guidance to $165–$175 million from $155–$175 million. ViroPharma said that it does not expect health care reform to impact the near-term sales of Vancocin and Cinryze.

Expenses, both R&D and SG&A taken together, are expected to range from $135–$145 million, up from the previous guidance range of $125–$145 million.

Our View

We currently have a Neutral recommendation on ViroPharma. We are pleased with the company’s second quarter results. Moreover, ViroPharma has progressed on other fronts as well. The company filed for Prior Approval Supplement (PAS) with the US Food and Drug Administration (FDA) for industrial scale manufacturing - a response should be out in the fourth quarter. Additionally, ViroPharma expects the EU approval and launch of Cinryze to take place in the first half of fiscal 2011.

However, Vancocin, which is one of the primary revenue contributors of 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 generic 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 copy-cat version of Vancocin approved will be reduced and multiple generics may enter the market, thereby leading to significant sales erosion of the drug.