ViroPharma Value Excellent
Tuesday June 24, 3:13 pm ET
By Jason Napodano, CFA
We remain confident that ViroPharma Inc.'s (NasdaqGS: VPHM - News) position is strong. At this level the stock remains incredibly cheap, and we are optimistic that management will be able to add significant value in the coming years.
We see several driving forces in 2008 that lead us to believe it will be another solid year for the Vancocin antibiotic. We see significant opportunity for Vancocin to gain share in the most severely infected patients. Clostridium difficile infection is a life-threatening disease and the data is becoming clear that Vancocin is the best available option for its treatment.
We are concerned about this generic risk but also remind investors that ViroPharma could be a dramatically different-looking company in 2010 if pipeline antiviral candidate Camvia succeeds in treating cytomegalovirus disease.
The stock will most likely remain in the tight trading range until we get an update from the U.S. Food and Drug Administration/Office of Generic Drugs on generic Vancocin. Positive news will send the shares significantly higher. The launch of a generic product will probably cause a sell-off, although considering the current market value is $735 million and ViroPharma is sitting on $599 million in cash, we think that is a bet worth taking.
At this level the stock is too attractive to ignore. Our 2008 revenue forecast of $219.9 million yields a price to sales ratio of 3.3x. This is significantly below the biotechnology peer-group average of around 6.5x. We forecast 2008 EPS at $0.90. The price to earnings ratio is only 11.8x. We think Camvia offers a significant growth opportunity over the long-term. As a result, our rating is Buy and our price target of $14 is based on 15.5x our 2008 EPS estimate of $0.90.
surf's up......crikey
