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The problem with not being able to produce very much of a product is that minor issues get amplified in the sales figures. And even if those explanations are reasonable, investors often don't buy them.
Witness ViroPharma (Nasdaq: VPHM ) , which traded down 10% yesterday after sales of its hereditary angioedema drug Cinryze came in a little lighter than expected. Sales for the quarter were 21% higher than the year-ago quarter, but there was a $5 million drawdown of inventory because the release of a manufacturing run at the end of the quarter was delayed. If you factor that in, the year-over-year demand for the product was really about 29%.
That's the more relevant number, because the patient count will drive future sales assuming discontinuation rates remain low. Interestingly, of the 60 patients added this quarter, which is a good chunk for an orphan drug, 30% came after trying one of the three acute therapies for hereditary angioedema: CSL Behring's Berinert, Dyax's (Nasdaq: DYAX ) Kalbitor, and Shire Pharmaceuticals' (Nasdaq: SHPGY ) Firazy. Cinryze is a prophylactic that helps prevent the hereditary angioedema attacks, which are characterized by swelling that can be life-threatening if it occurs near the neck and constricts the airway. Patients not being satisfied with the acute treatments that are given once an attack begins is obviously good news for ViroPharma.
The biotech lowered guidance for the year, which was to be expected after Watson Pharmaceuticals (NYSE: WPI ) , Akorn (Nasdaq: AKRX ) , and Strides Arcolab launched generic versions of ViroPharma's antibiotic Vancocin, but the company didn't change the guidance for Cinryze that has become the future of the company.
The biggest issue for ViroPharma right now is getting the industrial-scale manufacturing of Cinryze approved to meet the increasing demand. The company resubmitted its application this month after getting turned down initially. The Food and Drug Administration has until August to respond, but ViroPharma is hopeful that it could get a decision earlier. The company has 10,000 doses already produced at the larger scale, so it only needs to slap labels on them and then they can be released a few weeks after approval.
Yesterday's drop might be a buying opportunity, although ViroPharma is still risky given the supply constraint. Risk adverse investors should wait until after the approval of the industrial-scale manufacturing. If you'd like to keep up with the happenings at ViroPharma, add it the Fool's My Watchlist service. Don't have an account? No problem; sign up for free.