ViroPharma Cheap and Promising
Friday August 1, 12:06 pm ET
By Jason Napodano, CFA
ViroPharma, Inc. (NasdaqGS: VPHM - News) made a bold move earlier in July to acquire Lev Pharmaceuticals and with it, Cinryze, a potential $250 million product for hereditary angioedema (HAE). HAE is an ultra-rare genetic disorder and a highly attractive market given the significant unmet medical need.
Thus, we are positive on the deal, but acknowledge that significant questions remain. Nevertheless, the move works to greatly diversify the product portfolio and ease investor concern that a generic Vancocin would be devastating to the financial results.
On the contrary, we think both Cinryze (under regulatory review) and antiviral maribavir (in phase III) could be on the market by 2010 and generating positive income. Couple this with an estimated $300 million in cash still to be on hand after the Lev deal closes, and still at least another year of exclusive Vancocin sales, and the company's fundamental position is rock solid. We are maintaining our Buy rating.
At this level ViroPharma stock is too attractive to ignore. Second quarter results handily beat our expectations. Our 2008 revenue forecast of $233.3 million yields a price to sales ratio of only 3.5x. 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 13.1x.
Our model will likely undergo significant revisions once the Lev deal closes in the fourth quarter, but as of now we see $1.32 per share in EPS in 2012 without Lev. Our initial projections show that Cinryze could add as much as a dollar of EPS to that figure by 2012. As such, we have moved our price target to $16 per share.
surf's up......crikey
