VPHM
DJ ViroPharma Falls Amid Fear Of Generic Competition >VPHM
11/10/2005
Dow Jones News Services
(Copyright © 2005 Dow Jones & Company, Inc.)
By Tim Paradis
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--ViroPharma Inc. (VPHM) shares lost 17.5% Thursday amid apparent concerns, which some analysts contend were largely unwarranted, that generic competition would encroach on sales of Vancocin, an antibiotic that has resuscitated ViroPharma's fortunes and stock price in the last year.
"I do think that concern is overblown," JMP Securities analyst Adam Cutler said Thursday, referring to the sell-off of ViroPharma shares following the announcement by Akron Inc. (AKN) that it had penned an agreement with India's Cipla Ltd. (500087.BY) to develop a generic form of an undisclosed antibiotic used in U.S. hospitals.
More than one analyst saw Akorn's statement as an oblique reference to Vancocin, which ViroPharma acquired a year ago from Eli Lilly & Co. (LLY).
"I'm not sure that given the current market opportunity and the cost and risks associated with trying to get a generic version approved that it adds up," he said, referring to a market opportunity for generic competition.
"At worst for ViroPharma, a generic version could be on the market in a few years. In the meantime, they should continue to enjoy growing sales while they are the sole provider of Vancocin," Cutler said. He rates the stock "market outperform" and carries a $28 price target.
Joel Sendek, an analyst at Lazard Capital Markets, wrote in a research note Thursday that while it appears Akorn and Cipla plan to develop a generic form of Vancocin, such an undertaking might prove difficult.
"We continue to believe that while the market is attractive, there are high barriers for any entry for such a generic, including manufacturing and the need for clinical studies, which may be difficult to enroll," Sendek wrote. He maintains his sales estimates for the drug.
Vancocin is used to treat the intestinal bacteria Clostridium difficile, which is often referred to as C. difficile. On Nov. 3, ViroPharma, which has raised prices for the drug several times this year, said it struck an agreement to boost the amount of the drug Lilly makes for ViroPharma. The Exton, Pa., company acquired the U.S. rights to Vancocin from Lilly a year ago.
Cases of C. difficile have increased in the U.S. in recent years, especially at hospitals where it is often strikes patients whose treatments for other conditions have included courses of antibiotics.
Earlier Thursday, ViroPharma said preliminary results from a Phase 1b study of HCV-796, a hepatitis C being co-developed with Wyeth's (WYE) pharmaceuticals unit, demonstrated antiviral effects in adult patients with chronic hepatitis C infection.
Referring to the results of the trial, Cutler said: "They were net positive and warrant further development."
On Monday, ViroPharma shares hit a 52-week high of $24.36 after the company said it swung to a profit from a loss in the third quarter and raised its sales forecast for the year. For the third quarter, revenue surged to $35.8 million from $398,000 a year earlier. Vancocin sales totaled a best-ever $35.7 million during the quarter.
Shares of ViroPharma traded at $18.11, down $3.85, or 17.5%, in 4 p.m. EST Nasdaq trading. Volume stood at 16.1 million shares. Average daily volume is 2.52 million shares.
The stock has risen from about $3 a share a year ago, beginning its precipitous climb in May.
Both JMP Securities and Lazard make a market in ViroPharma shares.
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