Theravance Just Lost Its Catalyst

Shares of Theravance Inc THRX fell more than 12 percent Wednesday morning after the company's commercial partner, GlaxoSmithKline plc (ADR) GSK, disclosed topline results from SUMMIT.

Theravance's trial attempted to prove survival benefits for Breo in COPD patients and failed to meet its primary endpoint while showing meaningful improvements versus a placebo in a series of secondary endpoints.

Bernstein: Results Are ‘Surprising' And ‘Disappointing

Aaron Gal of Bernstein commented in a note that Theravance's results were both "surprising" and "disappointing," as he was expecting "positive results" and "moderate positive impact on market adoption."

Gal added that the failure (especially after a "massive effort") will likely have a "modest negative impact" on U.S. adoption. However, the analyst noted that the failure may have a "more material impact" within the European Union, where the negative results may confirm the drug is "not worth paying for" given lower cost alternatives.

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Finally, Gal stated that the news will likely not impact script trends in the near term, but there are now "limited catalysts" to support a higher valuation on the stock. In addition, generics for Advair are expected to be submitted by Sandoz and Mylan by year-end 2015, placing Theravance's franchise "more materially at risk."

Shares remain Market Perform rated with an unchanged $15 price target.

Bank Of America: Downgrading Theravance To Underperform

Tazeen Ahmad of Bank of America downgraded shares of Theravance to Underperform from Neutral with a price target lowered to $13 from a previous $16.

Ahmad noted that the safety profile from the Breo study was positive with patients showing a 12.5 percent lower risk of death than patients not on Breo – a result that was "not statistically significant" (p=0.137).

Ahmad added that Breo scripts have actually rebounded in 2015 following GlaxoSmithKline's adjustments to its sales force. While these trends were viewed as being "positive" by the analyst, expansion into the primary care market will now prove to be "more challenging" without a label showing mortality benefit.

Ahmad also lowered his peak U.S. Breo sales estimate in COPD to $450 million from $550 million and revised his peak estimates to 2020, a year later than previously projected. The analyst also lowered his ex-U.S. Breo (Relvar) sales peak to $450 million from $650 million.