Theravance Inc.
's (
THRX
) fourth quarter 2011 loss per share of 45 cents was wider than the
Zacks Consensus loss Estimate of a loss of 39 cents as well as the
year-ago loss of 25 cents per share. The wider loss was
attributable to lower revenues as well as increased research and
development (R&D) expenses.'
The Quarter in Detail
Revenues for the quarter primarily consisted of the amortization
of deferred revenues received under the company's collaborations
with Astellas Pharma and
GlaxoSmithKline plc
(
GSK
). Revenue at Theravance was down 22.8% over the prior year to $5.4
million due to lower royalties in the quarter. Revenue was also
below the Zacks Consensus Estimate of $7 million. Vibativ, an
injectable antibiotic, is Theravance's only commercialized drug. In
early January 2012, Theravance announced termination of its
license, development and commercialization agreement with Astellas
for Vibativ. Theravance earned a royalty of $0.3 million on Vibativ
sales from Astellas Pharma on net sales of $1.6 million in the
reported quarter.
Vibativ is currently marketed in the US and Canada for the
treatment of complicated skin and skin structure infections
(cSSSI). Vibativ is under review in the EU for the disease. Vibativ
is marketed in the EU for the treatment of nosocomial pneumonia (
NP
). In the US, however, Theravance received a complete response
letter ("CRL") for the NP indication. Theravance is on the lookout
for strategic alternatives for the drug, including a new
partner.
General and administrative (G&A) expenses rose 14.9% to $8.5
million during the fourth quarter due to higher employee costs.
Research and development (R&D) expenses shot up 85.7% over the
prior-year quarter to $32.5 million primarily due to higher costs
for the development of Theravance's pipeline candidates under the
PμMA and MARIN programs as well as on some additional preclinical
HCV and cardiovascular programs.
Pipeline Update
Theravance has an active collaboration with Glaxo for the
development of its lead pipeline candidate, Relovair. Relovair is a
combination of fluticasone furoate and vilanterol and is being
developed for the treatment of chronic obstructive pulmonary
disease ("COPD") and asthma. In January this year, the companies
announced top-line data from pivotal phase III studies. Despite
mixed results from the studies, both Glaxo and Theravance are
confident about Relovair's prospects and feel that the results are
adequate for filing. Glaxo plans to submit marketing applications
to the regulatory bodies in the US and Europe in mid-2012 for the
COPD indication.
For the asthma indication, the company plans to seek EU approval
in mid-2012. Glaxo remains in talks with the FDA on requirements
for a filing for the asthma indication of Relovair.
2012 Guidance
Theravance expects operating expense in the range of $120
million to $130 million in 2012. Operating expenses include R&D
and G&A expenses, but exclude stock-based compensation expense.
Theravance will no longer recognize any Vibativ royalty and will
record the remaining deferred non-cash amortization of the
milestones associated with this collaboration in the first quarter
of 2012.
Our Recommendation
We currently have a Neutral recommendation on Theravance. The
stock carries a Zacks #3 Rank (short-term 'Hold' rating).
We hold that earnings reports are a non-event for Theravance as
investor focus will be focused on the pipeline programs with
GlaxoSmithKline. Although Theravance's pipeline is quite
impressive, we believe the main potential lies with the Relovair
collaboration.
Relovair, if approved, will be positioned as a replacement for
Glaxo's top-selling medicine Advair. In light of the mixed results
from the studies, we remain cautious about the chances of Relovair
gaining first-round approval. The FDA could ask the companies for
additional data for the asthma indication. We believe that 2012
will be an important year for the company due to significant
clinical catalysts. We therefore prefer to remain on the sidelines
and watch how the year shapes up for the company.
GLAXOSMITHKLINE (
GSK
): Free Stock Analysis Report
THERAVANCE INC (
THRX
): Free Stock Analysis Report
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