"ViroPharma, Inc.’s (VPHM) stock has been in a sideways trend for the past several months. And, although we are maintaining our Buy rating on the stock, we continue to see little movement until an update on a potential generic Vancocin product.
Management continues to petition the FDA to delay a generic entrant, most recently submitting views on the in-vitro dissolution bioequivalence testing methods. Approval of a generic product at Strides/Akorn at any time could create volatility in the stock.
At this level, ViroPharma stock is too attractive to ignore. Our 2008 revenue forecast of $221.5 million yields a price to sales ratio of 2.9x. This is significantly below the biotechnology peer group average of around 6.5x. We forecast 2008 EPS at $0.95 (including option expense). The price to earnings ratio of 9.9x is so far below the peer group, we can't help but wonder whether a company like GlaxoSmithKline (GSK), Bristol-Myers (BMY) or Wyeth (WYE) would be interested in acquiring ViroPharma.
ViroPharma’s stock sank in March 2006 on fears of generic Vancocin. Since that time, the company has continued to deliver solid results and progressed with Camvia to the point where we now include it in our long-term model. We think the candidate offers a significant growth opportunity over the long-term.
We think the market is too focused on the generic risk to Vancocin. We see the Citizen’s Petition as solid, and the recently initiated exploratory study to characterize the GI track of healthy vs. infected patients will only help add to the scientific validity of management's claim. The two letters made public outlining the legal and scientific merits for a judgment stay are rather convincing in our view."
Wow! Too attractive to ignore, and musing about buyouts? I will definately have to keep an eye on this one. The Fool has given this stock a lot of love also. See my previous posts on ViroPharma here.