(By Balachander) Theravance Inc. (NASDAQ:THRX) shares were downgraded to "Hold" from "Buy" by Brean Murray, Carret & Co. (BMC), which said the recent move in the stock has put the share price in closer alignment to its valuation.
"With the stock up 55 percent since our initiation report on March 12, 2012 at $18.01 vs. a flat S&P index, we believe the current market cap is more reflective of our fundamental view of the THRX opportunity and we would look for a better entry point," BMC analyst Brian Skorney wrote.
Theravance and GlaxoSmithKline Plc (NYSE:GSK) reported unambiguously positive top-line data for four Phase 3 studies of the LAMA/LABA combo, umeclidinium bromide/vilanterol (UMEC/VI), for COPD. The companies are planning global regulatory submissions around the end of 2012.
"Not only did the studies show statistically significant superiority on each of the key comparisons to placebo but comparisons of the combination to the individual components as well as an active comparator, Spiriva (tiotropium), were also positive," the analyst said. "Overall we believe these results paint the combination in a favorable light, supporting a commercial blockbuster."
With the potential approval of Relovair and UMEC/VI so closely spaced, Skorney said it will be important to position the products toward different patient populations to not cannibalize each other.
Skorney sees the dual bronchodilatory effect of UMEC/VI allowing a greater ease in breathing of patients, while anti-inflammatory properties of Relovair aiding those at risk of exacerbation. Theravance will receive a tiered royalty from GSK on global sales of UMEC/VI ranging from 6.5 percent and climbing to 10 percent.
South San Francisco, California-based Theravance is engaged in the discovery, development, and commercialization of small molecule medicines primarily for therapeutic areas of respiratory diseases, bacterial infections, and central nervous system (CNS)/pain.
The stock, which has been trading between $12.91 and $28.00 over the past year, fell 3.33 percent to trade at $27.00 on Friday.