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.
GLAXOSMITHKLINE (
GSK
): Free Stock Analysis Report
THERAVANCE INC (
THRX
): Free Stock Analysis Report
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