The recent failure of ViroPharma’s cytomegalovirus drug maribavir in phase III trials was clearly a massive disappointment for investors who had high hopes that the product would provide significant revenue and earnings growth and enhance the company’s reputation as a major specialty player; shares have fallen over 50% since the news to trade at a three-year low of around $5.95, with little sign of a recovery so far.
However, if important regulatory and generic competition decisions go their way this year, coupled with a shrewd company or product acquisition, the outlook for ViroPharma should not be all doom and gloom. With around $300m in cash and chief executive, Vincent Milano, having clearly stated a desire to license new products, particularly for transplantation, an analysis by EP Vantage reveals that the group will not be short of licensing opportunities, with 29 unpartnered transplantation drugs currently in the clinic, split between 24 small-cap and private companies (see table below).
In response to the maribavir failure, Mr Milano strongly hinted that existing cash, enhanced by funds freed up by scrapping the maribavir trials, will be used to source products for serious and life threatening conditions with unmet needs which require a limited commercial infrastructure, particularly those in a transplantation setting (ViroPharma's maribavir disappointment will sharpen focus, February 10, 2009).
An analysis of pipeline data from EvaluatePharma, which excludes products already partnered in key markets or in development by companies with a market capitalisation greater than $2.5bn on the assumption that these companies have the infrastructure to commercialise the drugs themselves, reveals some interesting opportunities within the transplantation field.
|Unpartnered transplantation products in development||WW annual sales ($m)|
|Phase||Product||Indication||Company||Market Cap ($m)||Pharmacological Class||Markets||2012||2013||2014||WW Peak Sales ($m)|
|Phase III||1||LCP-Tacro||Kidney transplantation||LifeCycle Pharma||107||Calcineurin inhibitor||WW||46||91||148||-|
|2||ALD-101||Graft vs host disease (GvHD)||Aldagen||Private||Stem Cell Therapy||WW||-||-||-||-|
|3||Inhaled Cyclosporine (CIS)||Lung transplantation||APT Pharmaceuticals||Private||Immunosuppressant||WW||-||-||-||-|
|4||Reviroc||Organ and tissue transplantation||Kiadis Pharma||Private||Immunosuppressant||WW||-||-||-||-|
|5||GS-101||Organ rejection||Gene Signal||Private||Angiogenesis inhibitor||WW||-||-||-||-|
|6||LX201||Organ rejection||Lux Biosciences||Private||Immunosuppressant||WW||-||-||-||-|
|Phase II||1||TK||Bone marrow transplantation||MolMed||132||Hematopoietic cell||WW ex. Asia||8||20||41||524|
|2||BCX-4208 (R3421)||Organ rejection||BioCryst Pharmaceuticals||62||Purine nucleoside phosphorylase (PNP) inhibitor||WW||-||-||-||500|
|3||Neuprex||Bone marrow transplantation||XOMA||105||rBPI protein||WW||-||-||-||-|
|4||Trans-ISA247||Kidney transplantation||Isotechnika||12||Calcineurin inhibitor||WW (transplant indications & psoriasis)||-||-||-||-|
|5||TP10||Cardiopulmonary bypass surgery||Celldex Therapeutics||134||Complement inhibitor||WW||-||-||-||-|
|6||TOL101||Organ rejection||Tolera Therapeutics||Private||Anti-CD3 Mab||WW||-||-||-||-|
|7||ATIR||Graft vs host disease (GvHD)||Kiadis Pharma||Private||Immunosuppressant||WW||-||-||-||-|
|8||Rhitol||Graft vs host disease (GvHD)||Kiadis Pharma||Private||Immunosuppressant||WW||-||-||-||-|
|9||Busulipo||Bone marrow transplantation||Pharmalink||Private||Alkylating agent||WW||-||-||-||-|
(For the full analysis of the 29 unpartnered clinical stage products, as well as 35 pre-clinical candidates, please firstname.lastname@example.org)
Assuming that ViroPharma prefers products in a relatively late-stage of development, a couple of companies stick out given they have a portfolio of transplantation drugs: Danish company LifeCycle Pharma, with a modest market cap of $107m, is developing improved formulations of existing immunosuppressant drugs and Dutch private biotech Kiadis Pharma with three clinical stages candidates.
In addition, a number of companies have made no secret of their desire to sign up a partner for their transplantation drugs, including Xoma, Isotechnika and Celldex Therapeutics.
Whilst acquisitions will bolster ViroPharma’s pipeline, its biggest existing opportunity is hereditary angioedema (HAE) drug Cinrzye, a protein replacement therapy it bought with the acquisition with Lev Pharmaceuticals last year.
The drug is currently marketed as a preventative treatment for the sometimes fatal swelling disorder, a setting in which it won approval last October. Analysts have pencilled in sales of $49m this year and $255m by 2014, however there is a growing possibility that those figures could rise this year.
A PDUFA date of June 3 has been set to review the drug in an acute setting, whereby a patient would be given a transfusion, replacing the C-1 esterase inhibitor they lack, once an attack is underway. However, CSL also has its almost identical product, Berinert P, under review at the FDA for this indication. Under orphan drug rules, the approval of one would block the other from the market for seven years.
CSL filed ahead of ViroPharma, but received a complete response letter last December. The company’s chief executive said yesterday at a results presentation that their response has not yet been re-submitted to the FDA. Assuming they file before the end of February and are granted a class I response, by far the best case scenario, it would mean an answer within three months, taking it very close to ViroPharma’s own PDUFA.
As ViroPharma’s Mr Milano has pointed out, every HAE drug filed with the FDA in an acute setting; Dyax’s ecallantide; Jerini’s Firazyr which is now owned by Shire, and now the CSL product; has received an initial knock back from the regulator, and Cinryze could be the same. However, the FDA has already seen the drug in a preventative setting, and this could mean a higher chance of success.
Analysts currently do not include any sales in the acute setting for Cinryze, which is seen as a smaller opportunity anyway due to the more convenient small molecule approaches nearing the market. However, winning approval first and blocking a competitor would only be a positive. An advisory committee to review both drugs is still a distinct possibility.
How the generic threat to Vancocin, a key antibiotic and profit earner for the company, plays out this year will also have an impact. Although the pathway to approval is not yet clear for copycat antibiotics, analysts are factoring in some competition this year. Sales are expected to have peaked at $225m last year, dropping to $34m by 2012, a consensus of opinion that has not shifted significantly over the last five months.
Therefore, any delay to generic competition this year will raise the value of the product, currently estimated at $162m according to EvaluatePharma’s NPV Analyzer.
Potential for a rebound
Following ViroPharma’s recent share price crash, the company’s enterprise value of $434m is 18% lower than the combined net present value of Cinryze and Vancocin, at $529m.
With the potential upside for both products this year, and if suitable new products can be acquired, there remains clear scope for investors to get over the maribavir disappointment and for confidence to return in ViroPharma, with a resulting rebound in share price.