Anacor Reports Wider-than-Expected Q1 Loss - Analyst Blog

Shares of Anacor Pharmaceuticals Inc. ANAC fell 9.2% after the company reported a wider loss. Anacor reported first quarter 2014 net loss per share of 51 cents, wider than the Zacks Consensus Estimate of a loss of 39 cents per share and the year-ago loss of 42 cents per share.

First quarter revenues were $4.2 million, compared with $1.7 million in the year-ago quarter. Revenues beat the Zacks Consensus Estimate of $4 million. Revenues comprised solely of contract revenues. Revenues increased due to research work performed under agreements with the Gates Foundation and Defense Threat Reduction Agency (DTRA).

Research and development (R&D) expenses shot up 42.8% year over year to $15.9 million primarily due to clinical expenses for the development of AN2728. General and administrative (G&A) expenses increased 76.6% year over year to $8.3 million due to stock-based compensation expenses and pre-launch sales and marketing expenses for Kerydin.

Pipeline Update

Anacor's pipeline includes several topical candidates including an anti-fungal onychomycosis candidate, Kerydin. The U.S. Food and Drug Administration (FDA) accepted Anacor's New Drug Application (NDA) for the prevention of onychomycosis in Oct 2013. A response from the U.S. regulatory body should be out by Jul 29, 2014. Anacor intends to launch Kerydin in the second half of 2014 assuming FDA approval. In addition, Anacor commenced a study on Kerydin in Mar 2014 for the treatment of mild-to-moderate toenail onychomycosis in conjunction with debridement, as needed.

Another interesting candidate in Anacor's pipeline is AN2728 for the treatment of mild-to-moderate atopic dermatitis and psoriasis. Anacor reached an agreement with the FDA on all major parameters for the phase III trials in the end-of-phase II meeting in Feb 2014. The phase III trials comprise two studies enrolling roughly 750 patients (two years and above) each. In Mar 2014, Anacor enrolled the first patient in this phase III study. Anacor expects data from this study in the second half of 2015.

Guidance

2014 Kerydin net sales (assuming approval) is expected in the low-to-mid single digit (millions of dollars). Contract revenue will be around $3 million for every remaining quarter of 2014.

R&D expense is expected in the range of $19 million to $21 million per quarter. This rise in the R&D expense guidance takes into account the ongoing pivotal phase III studies of AN2728. G&A expense (assuming launch of Kerydin) is expected in the range of $9 million to $10 million in second quarter 2014 and $17 million to $19 million in the third and fourth quarters of 2014.

Anacor carries a Zacks Rank #3 (Hold). Some better-ranked stocks include Alexion Pharmaceuticals, Inc. ALXN, Allergan Inc. AGN and Gilead Sciences Inc. GILD. Alexion Pharma and Gilead Sciences carry a Zacks Rank #1 (Strong Buy) while Allergan holds a Zacks Rank #2 (Buy).