According to the analyst the upgrade ise based on on a potential surprise for Cinryze revenues and the generic Vancocin overhang being priced into shares. Importantly, 1) investor focus should shift to the continuing Cinryze launch following the development of guidelines for generic Vancocin; 2) Oppenheimer sees minimal downside should Berinert P be approved, as it would likely not impact Cinryze prophylaxis utilization; 3) they believe VPHM shares are pricing in generic Vancocin; and 4) firm is increasing their Cinryze estimates based on penetration in patients currently receiving prophylaxis steroids.
Cinryze launch in focus; revenues could surprise: Oppenheimer believes 2009 Cinryze sales will beat guidance, with revenues surprising as early as 3Q09. In their estimate, VPHM has set an achievable bar to beat guidance. They estimate Cinryze sales of $100M versus consensus of $84M during 2009.
ViroPharma introduced 2009 Cinryze guidance of $80-$95M on the company’s 2Q’09 earnings call, which he firm sees as unimpressive, since low end implies flat 2H’09 sales. They believe 2009 Cinryze sales will beat guidance, with revenues surprising as early as 3Q’09.
Although a generic Vancocin approval would be a near-term negative, they believe investor focus should shift to the continuing Cinryze launch, which could provide significant upside. Based on comments by the company, a greater number of patients being added to Cinryze Solutions are new patients versus those coming from clinical trials. Additionally, the firm notes that approximately 1,500 patients are currently receiving prophylaxis steroid treatment for Hereditary Angioedema (HAE), representing a key switch opportunity for Cinryze given the adverse events associated with steroids.
Not anticipating Berinert P approval; minimal downside if occurs: Although Oppenheimer does not anticipate CSL's Berinert P will be approved, they see minimal downside if FDA grants marketing authorization. Based on FDA's attitude toward Cinryze and Dyax's DX-88 in acute HAE, they do not believe FDA views the acute indication as clinically viable.
Vancocin generic overhang priced in: Firm believes VPHM shares currently reflect the launch of generic Vancocin in early 2010. Importantly, they anticipate FDA will issue final guidance and deny VPHM's Citizen Petition near term, leading to potential ANDA approvals in early 2010. However, they expect VPHM to retain ~$50M in annual branded Vancocin sales longer term
Increasing Cinryze estimates, upgrading to Outperform, $13 PT: Oppenheimer's 2009 Cinryze revenue estimate increases to $100M from $88M, and 2010 to $188M from $159M. Our 2009 total revenue estimate increases to $328M from $304M, and 2010 to $211M from $182M. Their 2009 adjusted EPS increases to $1.64 from $1.44, and 2010 to $0.38 from $0.30.
Notablecalls: Nice little upgrade. The only problem with this one is that it will be bid up too much in the pre-market action. You'd have to pay up 4-5% in hopes of selling the stock up 6-7% later on. If the market turns sour again the 6-7% scenario won't happen, making you (and all the other buyers) look silly.
So, ignore the pre-mkt action, see if it lets you in after the open dip.