Small-cap pharmaceutical ViroPharma
What analysts say:
- Buy, sell, or waffle? Most of the 10 analysts are bullish on ViroPharma, with six saying "buy," three saying "hold," and one saying "sell."
- Revenues. Analysts see revenues in line with the prior year's Q4 total of $40 million.
- Earnings. Profits, though, are expected to decline 83%, to $0.20 per share, as the company had a $45 million tax benefit last year that won't occur in such magnitude again.
What management says:
ViroPharma has just one product in production right now, the antibiotic Vanconin. It has a couple of other drugs in the pipeline, which it either acquired from GlaxoSmithKline
What management does:
ViroPharma was able to see a large spike in gross margins last quarter, as it switched its supplier of Vancocin from Eli Lilly to lower-cost OSG Norwich. That should help it maintain or improve its operating margins in the coming year. Going forward, all of ViroPharma's supplies will come from OSG.
09/05 |
12/05 |
03/06 |
06/06 |
09/06 |
|
---|---|---|---|---|---|
Gross |
86.6% |
86.4% |
85.1% |
85.2% |
87.0% |
Operating |
63.1% |
66.6% |
63.3% |
62.4% |
62.5% |
Net |
42.4% |
85.9% |
77.7% |
78.0% |
71.8% |
One Fool says:
At the moment, ViroPharma is in a sweet spot. It's the only drug approved for treatment of enterocolitis, and it commands premium prices for its drug. Yet the Office of Generic Drugs changed its policy on allowing generics to compete against Vancocin, causing a downdraft in ViroPharma's stock price. While no one's entered the market yet, a generic's presence would severely pinch the pharma's revenues. Moreover, considering the negative fallout the FDA has received from the approvals it granted to Merck
Still, the situation also highlights the problems of investing in one-trick ponies. Until it develops new drugs, ViroPharma is at the mercy of how that drug is received. So far, things have been going well for Vancocin, but it won't last. Unless it gets its new anti-infectives in the marketplace soon, ViroPharma should be seen as the risky investment that it is.
Related Foolishness:
- The Long Road Ahead for ViroPharma
- ViroPharma's Generic Discount
- Nothing's Wrong with ViroPharma
- Foolish Fundamentals: Margins
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GlaxoSmithKline and Eli Lilly are Motley Fool Income Investor selections. Pfizer is a Motley Fool Inside Value selection.
Fool contributor Rich Duprey owns shares of Merck, but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.