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Analyst Blog

ViroPharma, Inc. recently announced the completion of the acquisition of Swedish pharma company, DuoCort Pharma AB, following the European approval of Plenadren for the treatment of adrenal insufficiency in adults. We were expecting the deal to close in the fourth quarter of 2011, which was largely dependant on the European approval of Plenadren.

ViroPharma had agreed to acquire DuoCort Pharma in October, for which it made an upfront payment of $33.6 million. Additionally, DuoCort Pharma is eligible to receive $131 million on the achievement of certain milestones.

The European Commission (EC) has granted orphan drug status to Plenadren for the said indication. ViroPharma plans to launch the drug within a year and expects to record peak sales of up to $50 million.

Adrenal insufficiency (AI) is caused by the dysfunction of the adrenal gland, leading to low levels of the hormone cortisol, which regulates many critical body functions. Common symptoms of AI include fatigue, muscle weakness, fever, weight loss, difficulty in standing up, changes in personality, and gastrointestinal involvement.

We believe that this acquisition will expand ViroPharma's orphan disease commercial product portfolio, with the addition of Plenadren. ViroPharma currently has only two products on the market – Cinryze and Vancocin.

We are pleased with Cinryze’s (approved for the treatment of hereditary angioedema) uptake in the US and expect investors to keep a close watch on the performance of the drug in the European Union (EU), where it was launched recently.

However, we are concerned about Vancocin (approved for the treatment of clostridium difficile infection), which faces competition from Optimer Pharmaceuticals Inc.’s Dificid (fidaxomicin), which is marketed in the US. The candidate is currently under review in the EU. We believe that Dificid could turn out to be a major threat to Vancocin, which is currently not protected by any patent.

We currently have a Neutral recommendation on ViroPharma. The stock carries a Zacks #3 Rank (Hold rating) in the short-run.

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