We are maintaining our Neutral recommendation on
) with a target price of $28.00. The stock carries a Zacks #3 Rank
(Hold rating) in the short run.
Theravance suffered a loss of $0.42 per share in the second quarter
2012. The loss, slightly narrower than the Zacks Consensus loss
Estimate of $0.44, was wider than the year-ago loss of $0.31 per
share. The wider year-over-year loss was attributable to lower
Revenues plummeted 77.6% to $1.4 million in the second quarter
of 2012. Revenues were hurt by the termination of Theravance's
global deal with Astellas for Vibativ.
Astellas called off its collaboration agreement with Theravance,
inked in 2005, in January 2012. With Astellas pulling out, supplies
in the US have been hit and will continue to dwindle unless this
issue is resolved.
Following the termination of the deal with Astellas, the Committee
for Medicinal Products for Human Use (CHMP) recommended that the
marketing approval granted to Vibativ for the nosocomial pneumonia
(NP) indication in September 2011, will be withdrawn due to
This will affect the top line since Vibativ is Theravance's sole
marketed product. Management stated that if the issue is not solved
promptly, the restoration of normal supply for Vibativ could
stretch for a period of 1-2 years.
Vibativ, an injectable antibiotic, is used 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. Theravance is exploring options regarding
future Vibativ sales, which also include finding a new partner for
Even though Vibativ is currently facing supply-related issues due
to the pull out of Astellas, we continue to believe that Vibativ
holds significant potential. Success in finding an established
partner for marketing Vibativ should result in sales of the drug
We are positive on Theravance's collaborations with
) for respiratory candidates (FF/VI, LAMA/LABA and MABA) and Alfa
Wassermann for the gastrointestinal motility dysfunction candidate
(velusetrag/TD-5108). FF/VI, which aims to replace one of Glaxo's
best-selling drugs Advair, holds the biggest potential in
Theravance's pipeline. FF/VI being developed for the treatment of
asthma and COPD, is a combination of fluticasone furoate (FF) and
vilanterol (VI), administered using a dry powder inhaler called
Glaxo and Theravance are seeking approval for FF/VI in the US and
the EU for COPD. In the EU, a regulatory application for the asthma
indication was also submitted in July 2012. The regulatory
applications for both COPD and asthma in the EU have been validated
by the European Medicines Agency (EMA).
The FDA is expected to render its final decision on the
candidate by May 12, 2013 for chronic obstructive pulmonary
disease. In May 2012, Glaxo announced that it has increased its
holding in Theravance to 26.8% from 18.3%. The increased holding
reflects Glaxo's confidence in FF/VI.
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THERAVANCE INC (THRX): Free Stock Analysis
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