Revenues Rise at Theravance - Analyst Blog

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Theravance Inc. 's ( THRX ) first quarter 2012 earnings per share of 93 cents compared favorably with the Zacks Consensus Estimate of 84 cents as well as the year-ago loss of 28 cents per share. Earnings were boosted by higher revenues.

Revenues jumped to $127.1 million in the first quarter of 2012 as opposed to $6.3 million recorded in the year-ago quarter. Revenues handsomely beat the Zacks Consensus Estimate of $110 million.

Revenues during the quarter were boosted by the recognition of $125.7 million as deferred revenue following the termination of Theravance's deal with Japanese company Astellas Pharma regarding Vibativ. Astellas decided to call off the collaboration agreement, inked in 2005, in January 2012. Theravance is evaluating options regarding future Vibativ sales including finding a new partner.

We note that Vibativ, an injectable antibiotic, is Theravance's sole marketed product. The drug is marketed for treating adults suffering from complicated skin and skin structure infections resulting from susceptible gram-positive bacteria, including both methicillin-resistant and methicillin-susceptible strains of staphylococcus aureus.

Both research and development (R&D) expenses (up 62.0%) and general and administrative (G&A) expenses (up 9.6%) were on the upswing during the quarter. The company's efforts to develop its pipeline coupled with higher costs related to employees pushed up the R&D expenses in the first quarter of 2012. Higher external and employee-related costs were primarily responsible for increased G&A costs.

Our Recommendation

Currently, we are Neutral on Theravance. Our long-term stance is in line with the Zacks #3 Rank (short-term Hold rating) carried by the company. Even though we are concerned by the challenges currently faced by Theravance regarding Vibativ supplies following the termination of the deal with Astellas, we are impressed by Theravance's pipeline.

In particular, we are positive on Theravance's collaborations with GlaxoSmithKline ( GSK ) for the Relovair, LAMA/LABA ('719/VI) and MABA programs. The Relovair program, which aims to replace one of Glaxo's best selling drugs Advair, holds the biggest potential in Theravance's pipeline. Relovair is a once-daily inhaled corticosteroid and a LABA combination medicine under development for the treatment of asthma and chronic obstructive pulmonary disease.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: GSK , THRX

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