Wider-Than-expected Loss at NPS Pharma, Shares Down - Analyst Blog

NPS Pharma's NPSP first quarter 2014 loss of 6 cents per share was wider than the Zacks Consensus Estimate of a loss of 4 cents. Lower-than-expected revenues contributed to the wider-than-expected loss at NPS Pharma. First quarter 2014 loss was however narrower than the year-ago loss of 9 cents per share.
 
The First Quarter in Detail

Revenues in the first quarter of 2014 jumped 73.2% to $44 million. Revenues were boosted by Gattex sales for the full quarter. Gattex, NPS Pharma's sole marketed product, was launched in the U.S. in Feb 2013 as a subcutaneous injection for treating adults with short bowel syndrome SBS, dependent on parenteral support. Gattex sales were only $0.7 million in the first quarter of 2013. Gattex sales improved 17% sequentially.

Royalty revenues climbed 5.6% year over year to $26.2 million in the first quarter of 2014. Bulk of the royalty revenues ($23.2 million) came from Amgen's AMGN Sensipar.  Revenues were short of the Zacks Consensus Estimate of $54 million.

Management stated on the first quarter conference call that sales of the drug were hurt in the first 2 months (January and February) of the quarter. The slowdown in sales was partially attributable to the extremely cold weather.

Research and development expenses climbed 31.2% to $20 million in the first quarter of 2014 due to lower expenses on clinical development activities a year ago. Selling, general and administrative expenses jumped 73% to $24.6 million in the first quarter of 2014. The massive increase was primarily due to costs pertaining to Gattex's marketing in the U.S. The drug was cleared in the EU in 2012 (European trade name: Revestive). NPS Pharma expects to commence pricing/reimbursement discussions with authorities in some EU countries during the year.

Gattex Outlook Trimmed

NPS Pharma trimmed its outlook for Gattex sales in 2014 due to the slowdown in sales in January and February. The company now expects sales in the range of $100 million–$110 million (old guidance: $110 million–$120 million). As a result of the company lowering its view on the sales of its sole marketed product, the stock was hammered following the earnings release. NPS Pharma closed the trading session on May 8 at $24.17 per share, down 10.61%. Operating expenses (excluding cost of goods sold and share-based compensation expense) in 2014 are projected in the range of $180 million–$200 million.

Our Take

We believe that the numbers put out by NPS Pharma in the first quarter are less important than the 2014 guidance cut with respect to Gattex. The trimming of guidance of the company's sole marketed product disappoints us. A key action date for NPS Pharma is coming up in October this year when the U.S. Food and Drug Administration (FDA) will decide on Natpara (hypoparathyroidism). We expect investor focus to remain on its regulatory status. Natpara approval will augment the company's top line and reduce its dependence on Gattex.

NPS Pharma, a biopharmaceutical company, carries a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the biopharma sector include Alexion Pharmaceuticals, Inc. ALXN and Gilead Sciences, Inc. GILD. Both stocks carry a Zacks Rank #1 (Strong Buy).