The cloud of uncertainty that's been hanging over ViroPharma (NASDAQ:VPHM) for many years may finally be lifting. The Food and Drug Administration has scheduled an advisory committee meeting for Aug. 4 to get input on whether the agency should approve generic versions of ViroPharma's antibiotic, Vancocin.
Vancocin, which fights C. difficile, a potentially deadly hospital-acquired infection, has been approved for sale since 1986. All the patents have expired, but Vancocin doesn't have any generic competition in the U.S. because the FDA hasn't allowed generic-drug companies to use laboratory tests to prove that their knockoffs are equivalent. Instead the agency has required generic-drug companies to run an expensive clinical trial to prove equivalency, which might not be financially feasible, given the lower margins on generic drugs. Three years ago the FDA signaled that it was thinking about lifting the clinical trial requirement, but ViroPharma has been fighting that the entire way.
A similar issue has plagued Momenta Pharmaceuticals and Novartis (NYSE:NVS), as they've tried to formulate generic versions of sanofi-aventis' (NYSE:SNY) Lovenox. Proving to the FDA that the drug is equivalent using laboratory tests has been difficult and they're likely to run into a similar fight as they try to get an approval for a generic version of Teva Pharmaceuticals' (NASDAQ:TEVA) equally complex Copaxone.
Antibiotics have become big business as bacteria have become more resistant to drugs. Last year Cubist Pharmaceuticals' (NASDAQ:CBST) Cubicin and Vancocin saw sales jump 45% and 14% year over year, respectively. And big pharma like Wyeth (NYSE:WYE) and Johnson & Johnson (NYSE:JNJ) have tried to get drugs approved or expanded to fight additional infections.
ViroPharma is trading at about twice its trailing-twelve-months sales, which is a pretty steep discount considering that its newest drug, Cinryze, just hit the market and should ramp up from here. Investors apparently are discounting sales of Vancocin until the uncertainty is over. Whether that'll happen in August or in three more years remains to be seen.
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