Piper Jaffray Defends THRX Following Delayed Sell-Off

Piper Jaffray is defending Theravance, Inc. THRX following a delayed sell-off on Friday prompted by Novartis' NVS decision to not pursue US development of a competing once daily long acting beta agonist (LABA) and inhaled corticosteroid (ICS) combination drug for COPD/Asthma. “Novartis stated on its conference call Thursday that size of safety studies required by the FDA would be prohibitive,” Piper Jaffray writes. “We believe any read-through into GSK/THRX's Relovair is casual at best as Phase III trials in COPD were based on discussions with the FDA. “Overall, we take comfort in: 1) Phase II Relovair data that exhibited a better safety profile than marketed LABA + ICS; 2) GlaxoSmithKline's GSK recent decision to increase its equity stake in THRX, which was based in part on its confidence in the Relovair program; and 3) Relovair's ability to generate sales above $3bn assuming US approval in COPD and ex-US approval in asthma/COPD.” Theravance closed Friday at $20.98; GlaxoSmithKline closed at $36.40; and Novartis closed at $55.92.