ViroPharma Update: Downgrades Underway
Following the news this morning that ViroPharma (NASDAQ: VPHM) was denied its U.S. Food and Drug Administration (FDA) citizen petition today, the global biotechnology company has been downgraded more than once.
After the announcement that its top-selling drug, Vancocin, would not be receiving bioequivalence, Bank of America and Brean Murray Carret promptly downgraded the stock to Neutral and Hold ratings, respectively.
According to Brean Murray Carret, Vancocin sales will rapidly erode throughout 2012.
“We expect that the approval of generic versions of Vancocin will result in a significant loss of earnings power over the next few years, as we believe gross profit will come down 18% in 2012 and another 26% in 2013. We expect that further efforts by ViroPharma to retain the Vancocin franchise will be unsuccessful and believe Cinryze is now the primary valuation driver. Although we continue to believe Cinryze offers attractive long-term potential, we believe the company is in for a difficult transition period as the dependable cash flow from Vancocin no longer provides valuation support. As a result we are downgrading to Hold,” the research firm noted in its Tuesday afternoon update.
While the FDA did support three generic versions of Vancocin, the approvals meant nothing to the company as they moved to block through injunction.
As a result, Bank of America lowered its PT on ViroPharma from $35 to $25, along with lowering Vancocin sales from $320M, $352M, $362M, and $109M to $131M, $36M, $28M, and $28M for 2012-2015.
ViroPharma is currently trading at $22.85, down -16.83% YTD.
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