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Theravance: Doing Well Despite SUMMIT


The 9m/2015 results are confirming my projections.

Formulary wins, increasing market share and improved pricing indicate that SUMMIT was a non-event.

Given the chronic stock undervaluation, the company is finally making the right move by launching a tender offer to repurchase a substantial amount of shares.

Q3 Results

After GSK (NYSE:GSK) had published its full-year 2014 results, I provided a first royalty forecast for Theravance (NASDAQ:THRX):

If GSK in each of the next 4 quarters simply sold the same amount of Breo/Relvar and Anoro it managed to sell in Q4/14, total 2015 sales would already reach GBP200m. However, as payer coverage has improved significantly in 2014, more markets are still being added and marketing has become far more aggressive, I would forecast growth to continue in 2015 and estimate 2015 total global sales for the two drugs to reach GBP300-400m or US$450-600m, meaning gross royalty revenues of about $50-65m for Theravance.

This forecast was already proven right three months ago, and the progress registered in Q3 continues to track the same trend:

Sales in GBP m















(Gross sales figures sourced from the GSK Q3 earnings release. Growth rates might slightly differ from the Theravance figures that are net of amortization).

While still low, these figures continue to grow rapidly. Especially after the asthma label expansion, Breo is accelerating in the U.S. (sales growth QoQ: 42%), as I had predicted in May.

(Source: THRX company presentation)

However, Breo's strong U.S. growth was partially offset by almost stagnating EU sales, so that the overall, global QoQ growth rate came in at 21% (Q2: 29%), which was explained by the fact that in Europe, summer is generally a weaker season for COPD and asthma products.

The company had already admitted that for Anoro some optimization was needed, and it appears that the first results of the improved sales organization are materializing: Anoro grew 47% QoQ - a significant boost compared to the Q2/Q1 growth rate of 25%. As some of this was due to initial stocking in Italy (where the drug was launched only a few days ago) and the elimination of regulatory restrictions in Japan, this growth will almost certainly not continue. So it remains to be seen if Anoro will manage to catch up to Novartis' (NYSE:NVS) Ultibro in the EU, where it still dramatically underperforms despite delivering at least equivalent benefits to patients. In fact, in its first 4 quarters on the market, Novartis managed to achieve $118 million in...