Viropharma announces financial results for third quarter 2013

ViroPharma Incorporated (Nasdaq: VPHM) reported today its financial results for the third quarter ended September 30, 2013. Net sales were $113 million for the third quarter ended September 30, 2013, as compared to $91 million in the same three months of 2012. The increase was primarily driven by growth in U.S. Cinryze sales. Cinryze U.S. sales of $102 million during the quarter reflect true patient demand as channel inventory levels remain unchanged from the prior quarter. 

"The third quarter of 2013 represented another extremely strong period of growth and positive momentum across our entire organization," stated Vincent Milano, ViroPharma's chief executive officer. "We continue to generate strong growth in our commercial business, notably led by the acceleration of Cinryze demand here in the United States.  Our pipeline also continues to advance, establishing a number of important data points over the next several months."

Our GAAP net income was $4 million in the third quarter of 2013 compared to GAAP net loss of $5 million in the third quarter of 2012. For the nine months ended September 30, 2013, GAAP net loss was $59 million compared to $10 million of GAAP net income during the first nine months in 2012.  As a reminder, the GAAP net loss for the nine month period of 2013 was primarily driven by the $104 million impairment charge related to the Vancocin intangible asset.

Non-GAAP adjusted net income for the three and nine months ended September 30, 2013 was $16 million and $38 million, respectively, compared to $7 million and $44 million for the same periods in 2012.  A reconciliation between GAAP and non-GAAP adjusted measures is provided in the Selected Financial Information – Non-GAAP Financial Measures Reconciliation table included with this release. 

Operating Highlights

Our U.S. net sales of Cinryze during the three and nine months ended September 30, 2013 increased to $102 million and $290 million, from sales of $84 million and $226 million, respectively, during the same periods in the prior year due to demand growth.

Cost of sales increased for the three and nine months ended September 30, 2013 primarily due to the effect of continuing growth of Cinryze.

Research and development costs increased in the third quarter of 2013 compared to the same period in 2012 due to advancement of our numerous pipeline development programs. Selling, general and administrative expenses in the three and nine months ended September 30, 2013 were relatively flat compared to the same periods of 2012.

For the nine months ended September 30, 2013, we recorded a $36 million tax benefit, compared to an $11 million tax expense in the prior year's period.

Working Capital Highlights

At September 30, 2013, our working capital was $403 million which included cash, cash equivalents and short term investments of $275 million.

Non-GAAP Disclosures

The Company is reporting both GAAP net income (loss) and non-GAAP adjusted results for the three and nine months ended September 30, 2013 and 2012. Non-GAAP adjusted net income is GAAP net income (loss) excluding (1) non-cash interest expense, (2) amortization related to intangible assets acquired, (3) share-based compensation expense, (4) changes in contingent consideration, (5) option amortization and (6) certain non-recurring events, including impairment losses. Non-GAAP adjusted diluted net income per share reflects the Non-GAAP adjusted net income, after the incremental effect of applying the "if converted" method of accounting to the senior convertible notes, and the diluted shares used in determining our GAAP diluted net income  (loss) per share. A reconciliation between GAAP and non-GAAP adjusted measures is provided in the Selected Financial Information – Non-GAAP Financial Measures Reconciliation table included with this release. The Company believes that its presentation of historical non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. These historical non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. Generally Accepted Accounting Principles.

Research and Development Programs

ViroPharma is investing in research and development programs to ensure growth for the future.  The current pipeline includes programs in various stages of clinical and pre-clinical development focused on rare diseases and serious unmet medical needs.

• Subcutaneous administration of Cinryze – We are advancing a low-volume formulation of subcutaneous Cinryze into a Phase 1 tolerability study in healthy subjects.  We intend to hold an end of phase 2 meeting with the FDA in the first quarter of 2014 with the target of initiating a phase 3 registration study of our subcutaneous Cinryze formulation in mid-2014. 
• New uses for C1 INH - We are investigating potential new uses for our C1 esterase inhibitor product with a goal of pursuing additional indications in patient populations with other C1 INH mediated diseases.  Studies in Neuromyelitis Optica (NMO) and Antibody-Mediated Rejection (AMR) post renal transplantation have been completed.  We expect to share more about these data and our plans at the 2014 JP Morgan Healthcare Conference in January. Our ex-VIVO study evaluating the effect of C1-INH in Refractory Paroxysmal Nocturnal Hemoglobinuria has been accepted as an oral presentation at the 2013 American Society of Hematology (ASH) annual meeting in December of this year.
• Maribavir for cytomegalovirus – We are currently enrolling patients into a Phase 2 program to evaluate maribavir for the treatment of CMV infections in transplant recipients.  The program consists of two independent Phase 2 clinical studies that include subjects who have asymptomatic CMV in one trial, and those who have failed therapy with other anti-CMV agents in another trial.  Interim data from these studies was presented in June of 2013.  Enrollment into both studies continues to accelerate and we expect to complete enrollment in both studies in the first half of 2014.
• VP-20629 for Friedreich's Ataxia (FA) – We initiated a single and multiple oral dose safety and tolerability study in patients in 2013. The company anticipates completion of enrollment in the first half of 2014.
• Oral Budesonide for eosinophilic esophagitis (EOE) – We currently have an exclusive option agreement to acquire Meritage Pharma, Incorporated pending data outcomes from a Phase 2 study and concurrence with the U.S. FDA on an acceptable clinical endpoint for the Phase 3 program.  The Phase 2 study is currently enrolling with data expected in 2014.

2013 Guidance

ViroPharma is providing guidance for the year 2013 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.

For the year 2013, ViroPharma is updating the following: 

• Worldwide net product sales are expected to be $445 to $465 million; 
• Net North American Cinryze sales are expected to be $395 to $405 million; and
• Research and development (R&D) and selling, general and administrative (SG&A) expenses are expected to be $240 to $260 million.

Conference Call and Webcast

ViroPharma is hosting a live teleconference and webcast with senior management to discuss the financial announcement, guidance, and all other operational results of the first quarter and discuss developments in the subcutaneous Cinryze clinical development program on October 31, 2013 at 9:00 a.m. Eastern. To participate in the conference call, please dial (800) 874-4559 (domestic) and (302) 607-2019 (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 15, 2013.