We have maintained our Neutral recommendation on
) with a target price of $20.00 per share. Our long-term
recommendation is in line with the Zacks #3 Rank carried by the
stock in the short-run.
In April 2012, Theravance reported its first quarter 2012
results. The company earned $0.93 per share in the quarter as
opposed to the year-ago loss of $0.28 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 (telavancin). 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.
Vibativ, an injectable antibiotic, is Theravance's sole marketed
product. It was approved by the US Food and Drug Administration
(FDA) in September 2009 for treating adults suffering from
complicated skin and skin structure infections
Theravance has active collaborations with
) 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. Relovair is being developed for the
treatment of chronic obstructive pulmonary diseases (COPD) and
asthma. Glaxo recently increased its holding in Theravance to 26.8%
from 18.3%. The increased holding Glaxo reflects its confidence in
the Relovair program.
We believe that the Relovair and the LABA/LAMA combination
programscould bring significant royalties to the company once
However, we are disappointed by the termination of Theravance's
deal with Astellas for Vibativ. Moreover, in February 2012, the
Committee for Medicinal Products for Human Use (CHMP) recommended
that the marketing approval received by Theravance in 2011 from the
EU for nosocomial pneumonia (NP) be withdrawn due to manufacturing
issues following the termination of the Astellas deal. Theravance
has received a complete response letter (CRL) for the NP indication
in the US.
In view of these challenges, we see limited upside potential for
the stock from current levels
GLAXOSMITHKLINE (GSK): Free Stock Analysis
THERAVANCE INC (THRX): Free Stock Analysis
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