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Could ViroPharma Benefit from Multiple Generic Versions of VANCOCIN?

Yesterday morning, the US Food and Drug Administration approved three drug manufacturers' generic versions of ViroPharma's (NASDAQ: VPHM) VANCOCIN HCl capsules. According to Watson Pharmaceuticals' (NYSE: WPI) statment, VANCOCIN is indicated for the treatment of C. difficile-associated diarrhea and also for the treatment of enterocolitis caused by Staphylococcus aureus (including methicillin-resistant strains).

As a result of the FDA ruling, the shares of ViroPharma have been trading approximately 20% lower. Auriga analyst, Difei Yang, who has a Hold rating on the stock told Benzinga that the launch of generic versions would have a significant impact on ViroPharma, as VANCOCIN makes up approximately 50% of the company's revenues and more than a half of its profits.

Yang noted that ViroPharma is planning to file an injection in the coming days to prevent the launch of competing generic versions. If the injection gets approved ViroPharma will continue to be the sole manufacturer and distributor of VANCOCIN.

WBB Securities' President and biotech expert, Steve Brozak was very critical towards the FDA's decision to approve the generic versions. He noted that VANCOCIN is a “drug of last resort” used with extremely ill patients. The multiple generic versions might have unintended and unexpected outcomes, which could be less desirable for the patients.

Brozak, who has published articles, such as Caution – The FDA Could Be Hazardous to Your Health, also criticized the decision as a greater availability of the drug could increase the occurrence of bacteria that is immune to it. Essentially, this means that drug could become less effective posing a risk to the patients whose lives are depending on it.

Steve Brozak points out that these situations would be disastrous for the patients, but could provide an opportunity for ViroPharma, as the doctors could become hesitant to prescribe other manufacturers' generic VANCOCIN. Brozak said that WBB Securities will be likely to re-examine its current Strong Buy rating on ViroPharma, but noted that he the company has sufficient cash flow to visit new drug opportunities to potentially replace the sales that the company loses when the generic versions of VANCOCIN are launched.

You can follow me on Twitter @TuomoKallio

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