Oct. 28, 2009 (PR Newswire) -- EXTON, Pa., Oct. 28, /PRNewswire-FirstCall/ -- ViroPharma Incorporated (Nasdaq: VPHM) reported today its financial results for the third quarter ended September 30, 2009.

--  Delivered $81 million in net product sales including $29 million in net
sales of Cinryze(TM);
--  Achieved adjusted net income of $32 million; GAAP net income reached $20
million;
--  Improved working capital to $358 million as of the end of the third
quarter of 2009, including cash and cash equivalents of $289 million;
and

--  Delivered positive cash flows from operations of $42 million for the
nine months ended September 30, 2009.

Net sales were $80.6 million and $222.6 million for the three and nine months ended September 30, 2009, respectively, as compared to $65.9 million and $182.3 million for Vancocin only in the comparative three and nine month periods of 2008, respectively. This represents 22 percent growth in the three and nine month periods in net product sales.

The Company is reporting both GAAP net income (loss) and adjusted results for the three and nine months ended September 30, 2009 and 2008. Adjusted net income is GAAP net income excluding (1) non-cash interest expense, (2) amortization related to the acquisition of Lev Pharmaceuticals and Vancocin, and step up in inventory related to purchase accounting arising from the acquisition of Lev Pharmaceuticals, (3) stock compensation expenses, and (4) certain non-recurring events such as the goodwill write off and gain on extinguishment of repurchased bonds. A reconciliation between GAAP and adjusted net income is provided in the Selected Financial Information - Reconciliation of GAAP Net Income to Adjusted Net Income table included with this release.

The Company believes it is important to share these non-GAAP financial measures with shareholders as they better represent the ongoing economics of the business and reflect how we manage the business. Accordingly, management believes investors' understanding of the Company's financial performance is enhanced as a result of our disclosing these non-GAAP financial measures. Non-GAAP adjusted net income should not be viewed in isolation, or as a substitute for or superior to reported GAAP net (loss) income. ViroPharma's definition of non-GAAP financial measures may differ from others.

"The third quarter of 2009 was a period of execution for both the launch of Cinryze in the U.S. as well as planning for the long-term expansion of our C1(INH) franchise," commented Vincent Milano, ViroPharma's chief executive officer. "While the launch continues to proceed well beyond our best original expectations at this early stage, we also advanced our development strategies for providing mid and long-term growth opportunities with Cinryze both in the U.S. and abroad. Outside of our efforts surrounding Cinryze, we are also excited to have advanced our non-toxigenic C. difficile program into clinical studies in the third quarter."

GAAP net income for the third quarter ended September 30, 2009 was $20.1 million compared to $27.1 million for the same period in 2008. GAAP net loss for the nine months ended September 30, 2009 was $23.1 million compared to net income of $66.3 million for the same period in 2008. GAAP net income per share for the quarter ended September 30, 2009 was $0.26 per share, basic, and $0.24, diluted, compared to $0.39, basic, and $0.33, diluted, for the same period in 2008. GAAP net loss per share for the nine months ended September 30, 2009 was $0.30 per share, basic and diluted, compared to a GAAP net income per share of $0.95, basic, and $0.82, diluted, for the same period in 2008.

Non-GAAP adjusted net income in the three and nine months ended September 30, 2009 was $31.9 million and $76.1 million, respectively, compared to $33.0 million and $83.9 million, respectively, for the same periods in 2008. The decrease in adjusted net income for both periods is primarily due to lower Vancocin net sales, lower interest income and higher income tax expense due to lower qualified orphan drug spend for Maribavir. Offsetting these decreases is the net effect of the Cinryze launch and lower research and development expenses.

The change between our GAAP net loss for the nine months ended September 30, 2009 from GAAP net income in the same period of 2008 was the impact of our Goodwill impairment of $65 million and the $9.1 million gain on the repurchase of our convertible notes, in addition to the factors influencing our non-GAAP adjusted net income discussed above. The change in GAAP net income in the three months ended September 30, 2009 compared to 2008 was impacted by a $5.3 million increase in amortization related to the acquisition of Lev Pharmaceuticals, Inc. in addition to the factors influencing the non-GAAP adjusted net income.

Effective January 1, 2009, the Company was required under a new accounting standard to change the method of accounting for the Company's convertible notes. The Company revised its previously reported financial statements to apply this change in accounting to prior periods. Under this new accounting method, the Company's EPS and net (loss) income calculated in accordance with GAAP have been reduced as a result of recognizing incremental non-cash interest expense. In connection with adopting this new accounting standard, the Company recorded $1.8 million and $2.0 million of additional non-cash interest expense in the three months ended September 30, 2009 and 2008, respectively, and $5.5 million and $5.8 million for the nine months ended September 30, 2009 and 2008, respectively. For the three months ended September 30, 2008, the Company's previously reported net income calculated in accordance with GAAP changed slightly as the additional non-cash interest expense recognized under the new accounting standard was offset by lower income tax expense. For the nine months ended September 30, 2008, the previously reported net income has been reduced by $2.3 million to $66.3 million. There was no impact on diluted earnings per share for either period as a result of adopting this new accounting method.

Operating Highlights

Cinryze net sales during the three and nine months ended September 30, 2009 were $29.1 million and $61.3 million, respectively. Vancocin net sales during the three and nine months ended September 30, 2009, decreased 22.0 percent to $51.4 million and 11.5 percent to $161.3 million, respectively due to lower sales volume, partially offset by the price increase in January 2009.

Cost of sales increased over the three and nine month periods in the prior year by $7.8 million and $21.5 million, respectively, due to the launch of Cinryze. In the comparative periods in 2008, the Company only had cost of sales related to Vancocin. As part of our October 2008 purchase of Lev, we acquired Cinryze inventory which was recorded at fair value in purchase accounting. This fair value of inventory increased cost of sales for Cinryze until all purchased inventory was sold to SP/SD's, with the final $0.7 million affecting cost of sales in the third quarter of 2009.

Investment in our commercialization efforts, product pipeline and the company continued to grow as research and development (R&D) and selling, general and administrative (SG&A) expenses in the third quarter 2009 were $31.2 million as compared to $29.1 million in the third quarter of 2008. R&D expenses decreased $3.8 million related primarily to discontinuing the maribavir prophylactic program, offset by costs associated with the initiation of our Phase 1 clinical trial for NTCD and costs related to the Cinryze Phase 4 safety requirement study for the U.S. For the third quarter of 2009, SG&A increased $5.9 million over the same period in 2008. The largest contributors to this increase were increased compensation costs resulting from expansion of our Cinryze field force, increased marketing efforts and increased professional fees. For the nine months ended September 30, 2009, R&D expenses decreased $0.7 million, driven by decreased costs related to discontinuing the maribavir prophylactic program, offset by the Cinryze open label trials and patient follow-up, manufacturing NTCD spores, and higher compensation costs. For the nine month period, the largest contributors to this $23.8 million increase for SG&A over the nine month period in 2008 were increased compensation costs from the addition of our Cinryze field force, increased marketing efforts, and increased professional fees.

The Company's tax expense for the quarter was $9.6 million and $5.6 million for the quarters ended September 30, 2009 and 2008, respectively and $20.2 million and $19.7 million for the nine months ended September 30, 2009, respectively. Income tax expense includes federal, state and foreign income tax at statutory rates and the effects of various permanent differences.

Working Capital Highlights

As of September 30, 2009, ViroPharma's working capital was $357.9 million, which represents a $30.2 million increase from June 30, 2009 and a $40.5 million increase from December 31, 2008.