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ViroPharma Inc.’s (VPHM - Snapshot Report) second quarter 2012 adjusted earnings of 2 cents per share was well short of the Zacks Consensus Estimate of 10 cents and the year-ago earnings of 38 cents. The earnings miss was primarily attributable to lower revenues.
Quarterly revenues, which decreased 26.5% year over year to $94.6 million, also missed the Zacks Consensus Estimate of $104 million. The decline in revenue was primarily attributable to decreased Vancocin sales due to generic competition.
Cinryze sales increased 22.6% from the prior-year quarter to $76.6 million during the reported quarter, driven by higher demand. We note that earlier this month the US Food and Drug Administration (FDA) approved ViroPharma’s supplement to the Cinryze Biologics License Application (BLA) for industrial scale manufacturing changes. This industrial scale manufacturing project will enable ViroPharma to increase Cinryze production capabilities.
We note that Vancocin sales plummeted 75.6% to $15.9 million in the reported quarter. The decline was attributable to the generic vancomycin capsules in April this year in the US.
Research and development (R&D) expenses declined 18.6% during the quarter to $16.6 million. However, the prior-year quarter included a $9 million up-front payment to Halozyme leading to the year-over-year R&D decline in the reported quarter.
Selling, general and administrative (SG&A) expenses amounted to $40.9 million, up 27.4% from the prior-year quarter. The increase was primarily attributable to the costs related to the launch of Cinryze, Buccolam and Plenadren in Europe.
During the second quarter of 2012, ViroPharma repurchased 1.1 million shares for $22 million.
Following the second quarter results, ViroPharma revised its forecast for 2012. The company has adjusted its net product sales guidance to $450–$475 million (previous guidance: $450–$500 million). Of this, US Cinryze sales are expected to contribute $320–$335 million (previous guidance: $310–$330 million).
Further, combined R&D and SG&A expenses are forecasted in the range of $215–$235 million (previous guidance: $220–$250 million).
We are pleased to see the steady growth of Cinryze. The approval of the industrial scale manufacturing expansion process for Cinryze should be a major growth driver for ViroPharma. However, the introduction of the generic version of Vancocin will impact the company’s top line significantly.
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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