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Analyst Blog

Theravance Inc. (THRX - Analyst Report) and partner Astellas Pharma recently announced that their drug Vibativ received marketing approval in the European Union (EU) for the treatment of nosocomial pneumonia (NP), also known as hospital-acquired pneumonia including ventilator-associated pneumonia caused by methicillin-resistant staphylococcus aureus (MRSA).

Vibativ, Theravance’s only commercialized drug, is an injectable antibiotic, which is currently marketed in the US and Canada for the treatment of complicated skin and skin structure infections (cSSSI) caused by gram-positive bacteria, including resistant pathogens such as MRSA. It is, however, under review in the EU for the disease.

We remind investors that in May this year the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) had recommended approval of Vibativ for NP. The CHMP concluded that Vibativ provides a better benefit risk profile on the basis of quality, safety and efficacy data submitted.

In the US, however, Theravance received a complete response letter (CRL) for the NP indication. Per the CRL, the company will have to submit additional data and analyses for the NP patient population. While the Vibativ NP clinical trials included clinical response as the primary endpoint and all-cause mortality as a secondary endpoint, the US Food and Drug Administration (FDA) has asked the company to evaluate data with all-cause mortality as the primary efficacy endpoint. The company is currently in discussions with the FDA and has no express plans to conduct additional studies.

Vibativ is being marketed and sold by Astellas, while Theravance receives royalties, ranging from high teens to upper twenties, depending on sales volume.

Our Recommendation

We currently have a Neutral recommendation on Theravance. The stock carries a Zacks #3 Rank (“Hold”) in the short term. We believe investor focus is glued on the pipeline programs with GlaxoSmithKline.

We believe that Theravance’s lead pipeline programs, Relovair and the LABA/LAMA combination, hold immense potential and could bring significant royalties to the company, if successful. Meanwhile, royalties on Vibativ sales provide Theravance with some much-needed funds. On the flip side, the cSSSI market remains fiercely competitive. Though we are encouraged by approval of Vibativ for NP in the EU, we are disappointed with the CRL received in the US for the indication. At the end, though impressed by Theravance’s pipeline, we believe the major trump card for the company is the Relovair collaboration.

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