EXTON, Pa., Oct. 30 /PRNewswire-FirstCall/ -- ViroPharma Incorporated reported today its financial results for the third quarter and nine-months ended September 30, 2007.
Net sales of Vancocin(R) were $50.9 million for the third quarter of 2007 and $156.1 million for the first nine months of 2007 as compared to $55.1 million and $128.2 million in the respective 2006 periods.
Operating income in the third quarter and nine-months ended September 30, 2007 was $27.9 million and $96.7 million, respectively, compared to $34.5 million and $73.7 million in the third quarter and nine months of 2006, respectively. Operating income in the third quarter decreased primarily due to lower sales and increased development costs incurred during the quarter.
“Increased momentum in our Phase 3 Camvia program is of utmost importance to ViroPharma; the third quarter of 2007 reflected this momentum, as shown by the dramatic increase in clinical expenses this period over that of the same quarter in 2006,” commented Michel de Rosen, ViroPharma’s president and chief executive officer. “For example, we began enrolling into our pivotal Phase 3 trial in liver transplant recipients. There is tremendous global enthusiasm by investigators in this study, as well as in our ongoing pivotal study in stem cell transplant recipients. We also made good progress in elucidating the regulatory and clinical plan for Camvia in Europe. The third quarter was not only a great quarter of clinical execution, but also strong financially. The continued, robust performance of Vancocin helped grow our working capital to $573 million, of which $552 million is in cash, cash equivalents and short- term investments.”
Continued de Rosen, “Another company engaged in developing novel therapeutics targeting CDAD, Genzyme Corporation, presented data during the quarter which, among other things, compared clinical success with Vancocin to that of metronidazole and their investigational compound in patients with CDAD. These statistically significant results (p=0.04) showed that in cases of severe disease, patients achieved a higher clinical success rate than patients on metronidazole or the investigational compound. These data confirm the efficacy and safety of Vancocin in patients with severe CDAD and we expect that these data and the IDSA/SHEA guidelines for treatment of CDAD will be strongly considered in treatment recommendations.”
Net income in the third quarter and nine-months ended September 30, 2007 was $21.3 million and $75.0 million, respectively, compared to a net income of $23.3 million and $48.7 million for the same periods in 2006. Net income per share for the quarter ended September 30, 2007 was $0.30 per share, basic and $0.26 per share, diluted, compared to a net income of $0.34 per share, basic, and $0.33 per share, diluted, for the same period in 2006. Net income per share for the nine-months ended September 30, 2007 was $1.07 per share, basic, and $0.96 per share, diluted, compared to a net income of $0.71 per share, basic, and $0.69 per share, diluted, for the same period in 2006.
The primary drivers of the change in net income for the third quarter were the effects of decreased operating income discussed above, offset by increased interest income and a lower effective tax rate. Net income for the nine month period increased primarily due to higher net sales.
Operating Highlights
During the three and nine months ended September 30, 2007, net sales of Vancocin decreased 7.6 percent and increased 21.8 percent, respectively, compared to the same periods in 2006. The decrease in net sales of 7.6 percent resulted from fewer units sold to wholesalers in the third quarter of 2007 than during the third quarter of 2006 as a result of wholesaler buyer decisions to increase inventory levels in the third quarter of 2006. The nine month increase of 21.8 percent resulted from an increase in units sold to wholesalers and the impact of a price increase in 2007.
The gross product margin rate (net product sales less cost of sales as a percent of net product sales) for Vancocin increased to over 95 percent in the 2007 periods as compared to 91 percent and 87 percent for the third quarter and nine months of 2006, respectively. The increase is the result of the price increases and lower cost of sales per unit. This lower cost primarily results from the sale of units during the first half of 2007, which were manufactured by NPI Pharmaceuticals (formerly OSG Norwich) and carried a lower inventory cost than the units sold during the first half of 2006 that were manufactured by Eli Lilly & Co.
The total remaining costs and expenses associated with operating income were $21.0 million and $15.9 million, for the third quarter of 2007 and 2006, respectively, and $52.4 million and $37.9 million, for the nine months of 2007 and 2006, respectively. These increases are primarily due to research and development costs, increased medical education and legal costs as well as an increase in stock compensation expense.
The Company’s effective income tax rate was 36.4 percent and 37.3 percent for the quarters ended September 30, 2007 and 2006, respectively, and 32.3 percent and 38.1 percent for the nine months ended September 30, 2007 and 2006, respectively. Income tax expense includes federal, state and foreign income tax at statutory rates and the effects of various permanent differences. The decrease in the 2007 rate as compared to 2006 is primarily due to our current estimate of the impact of orphan drug credit for Camvia. The Company currently anticipates an effective tax rate of approximately 33 percent for the year ended December 31, 2007, which includes an estimate related to Camvia’s orphan drug credit based upon estimates of qualified expenses and excludes the impact of discrete items. The Company continues to evaluate our qualified expenses and, to the extent that actual qualified expenses vary significantly from our estimates, our effective tax rate will be impacted.
Regarding additional payments due to Lilly in connection with the Vancocin acquisition, net sales as of September 30, 2007 exceeded the maximum milestone threshold of $65.0 million. As a result, the Company recorded additional purchase price of $6.0 million to intangible assets in June 2007, which was paid to Lilly in the third quarter. No purchase price consideration will be due to Lilly relating to net sales occurring in the remainder of 2007.
Working Capital Highlights
As of September 30, 2007, ViroPharma’s working capital was $573.3 million, which represents a $306.9 million increase from December 31, 2006, $31.2 million of which occurred in the third quarter of 2007. The nine month increase is primarily the result of the senior convertible notes issued on March 26, 2007 and cash flows.
Looking ahead in 2007
ViroPharma is updating previously announced guidance for the year 2007 as a convenience to investors. The following guidance provided by ViroPharma are projections, based upon numerous assumptions, all of which are subject to certain risks and uncertainties. For a discussion of the risks and uncertainties associated with these forward looking statements, please see the Disclosure Notice below.
Non-GAAP Disclosures
This press release includes non-GAAP financial information as the Company’s projected research and development and marketing, general and administrative expenses has been presented excluding the effect of stock option expense resulting from the application of SFAS 123R. The Company believes that presenting its research and development (R&D) expense and marketing, general and administrative (MG&A) expense in this release both with and without the impact of share-based compensation will allow investors to better understand the Company’s financial results and how such results compare with the Company’s prior results and current guidance.
Conference Call and Webcast
ViroPharma is hosting a live teleconference and webcast with senior management to discuss the financial announcement, guidance, and other business results on October 30, 2007 at 9:00 a.m. Eastern Time. To participate in the conference call, please dial 877-366-0713 (domestic) and 302-607-2000 (international). After placing the call, please tell the operator you wish to join the ViroPharma investor conference call.
Alternatively, the live webcast of the conference call can be accessed via ViroPharma’s website at http://www.viropharma.com. Windows Media or Real Player will be needed to access the webcast. An audio archive will be available at the same address until November 13, 2007.
About ViroPharma Incorporated
ViroPharma Incorporated is committed to the development and commercialization of products that address serious diseases treated by physician specialists and in hospital settings. ViroPharma commercializes Vancocin(R) approved for oral administration for treatment of antibiotic- associated pseudomembranous colitis caused by Clostridium difficile and enterocolitis caused by Staphylococcus aureus, including methicillin-resistant strains (for prescribing information, please download the package insert at http://www.viropharma.com/docs/Vancocin_pi_2007.htm). ViroPharma currently focuses its drug development activities in viral diseases including cytomegalovirus (CMV) and hepatitis C virus (HCV). For more information on ViroPharma, visit the Company’s website at www.viropharma.com.
Disclosure Notice
Certain statements in this press release contain forward-looking statements that involve a number of risks and uncertainties, including the Company’s financial guidance for 2007. Forward-looking statements provide the Company’s current expectations or forecasts of future events. The Company’s actual results may vary depending on a variety of factors, including:
These factors, and other factors, including, but not limited to those described in ViroPharma’s 2006 annual report on Form 10-K and Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 filed with the Securities and Exchange Commission, could cause future results to differ materially from the expectations expressed in this press release. The forward-looking statements contained in this press release may become outdated over time. ViroPharma does not assume any responsibility for updating any forward-looking statements.
CONTACT: Vincent J. Milano, Vice President, Chief Operating Officer, Chief
Financial Officer and Treasurer, +1-610-321-6225, or Will Roberts, Senior
Director, Corporate Communications, +1-610-321-6288, both of ViroPharma
Incorporated
Web site: http://www.viropharma.com/
