Theravance Remains Neutral - Analyst Blog
June 14 2011 - 6:15AM
Zacks
We have maintained our Neutral recommendation on
Theravance, Inc. (THRX) with a target price of
$24.00 per share following the announcement of first quarter 2011
financial results.
Theravance’s first quarter 2011 loss per share of 28 cents was
in line with the Zacks Consensus Estimate, but narrower than the
year-ago loss of 35 cents per share. Revenues at Theravance
increased 10% year over year to $6.3 million. An increase in
royalty revenues from Vibativ sales in the reported quarter was
attributable for both the jump in revenues and the narrower
year-over-year loss per share. However, total revenue was below the
Zacks Consensus Revenue Estimate of $7 million.
Theravance has active collaborations with
GlaxoSmithKline (GSK) for the Relovair, LAMA/LABA
(also called 719/VI) and MABA programs. The Relovair program holds
the biggest potential in the company’s pipeline, which aims to
replace one of Glaxo’s best selling drugs, Advair. It is being
developed for the treatment of chronic obstructive pulmonary
diseases (COPD) and asthma. The LAMA/LABA combination is also being
developed for the treatment of COPD. Under the MABA collaboration,
Theravance is making rapid progress with GSK961081, which could be
another important option for the treatment of COPD. If successful,
this portfolio of respiratory products could put Theravance in a
very competitive position. Theravance is entitled to receive
royalties on sales of Relovair, LABA/LAMA, and MABA without any
cost obligations. We believe the revenue generated following the
approval of any of the programs will ultimately lead the company to
profitability.
Theravance, on its own, has a deep pipeline consisting of
candidates like TD-5108 (chronic constipation), TD-1792 (cSSSI),
and TD-1211 (opioid-induced constipation), which could boost future
revenues. All these programs are solely owned by Theravance and it
is looking for collaboration partners for the development and
commercialization of these compounds.
Theravance’s lead drug, Vibativ (telavancin), is an injectable
antibiotic approved for the treatment of complicated skin and skin
structure infections (cSSSI), caused by gram-positive bacteria,
including resistant pathogens such as methicillin-resistant
staphylococcus aureus (MRSA). Vibativ is being marketed and sold by
Astellas, while Theravance receives royalties, ranging from high
teens to upper twenties depending on sales volume. The US Food and
Drug Administration’s (FDA) approval to market Vibativ is a
significant achievement for the company which will provide
Theravance with much-needed funds.
Vibativ is also being studied for hospital-acquired pneumonia
(HAP) or nosocomial pneumonia (NP). Though the antibiotic has not
been approved for NP in either Canada or the US, the drug received
a positive opinion from the Committee for Medicinal Products for
Human Use (CHMP) for the NP indication in late May 2011. If
approved, this will be the first approval for the treatment of NP,
which is associated with high mortality rates. In US, Theravance
received a complete response letter (CRL) for the NP indication
from the FDA requesting for additional data. The company is
currently in discussions with the FDA and has no plans to conduct
additional studies. Though we are encouraged by the positive CHMP
opinion for Vibativ for NP, we are disappointed with the CRL
received in the US.
In addition, we are concerned about competition from other drugs
targeting gram-positive bacterial infections. Vibativ is competing
with ViroPharma’s
(VPHM) Vancocin, Cubist
Pharmaceutical’s (CBST) Cubicin, Pfizer’s
(PFE) Xyvox and Tygacil and Forest Laboratories’
(FRX) Teflaro. Consequently, we apprehend that Vibativ’s initial
sales ramp would be slow. We, therefore prefer to remain on the
sidelines on the stock.
CUBIST PHARM (CBST): Free Stock Analysis Report
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