NPS Pharma (NPSP) reported earnings of 2 cents per share in the second quarter of 2014, which compared favorably with the Zacks Consensus Estimate of loss of a penny and the year-ago adjusted loss of 6 cents per share. Higher revenues led to the favorable results in the quarter.
The Second Quarter in Detail
Revenues jumped 53.8% to $56.1 million. Revenues were boosted by impressive Gattex sales, which improved 22% sequentially to $22 million. Gattex, NPS Pharma’s sole marketed product, was launched in the U.S. in Feb 2013 as a subcutaneous injection for treating adults with short bowel syndrome (SBS), dependent on parenteral support. The drug was cleared in the EU in 2012 (European trade name: Revestive). NPS Pharma is currently preparing to roll out the drug in some EU countries.
Gattex sales were only $4 million in the second quarter of 2013. Earlier in the year, the FDA approved a revised label for the drug to include long-term data from the STEPS 2 study.
Royalty revenues climbed 7.9% year over year to $34.2 million in the second quarter of 2014. The bulk of royalty revenues ($31.6 million) came from Amgen’s (AMGN) Sensipar. Revenues were ahead of the Zacks Consensus Estimate of $52 million.
Research and development expenses declined 31.4% to $21.2 million in the reported quarter due to lower costs pertaining to the production of pre-approval Natpara inventory. Selling, general and administrative expenses jumped 82.1% to $26.4 million. The massive increase was primarily due to costs pertaining to Gattex’s marketing in the U.S. Costs related to pre-launch activities of Natpara also led to the increase.
2014 Outlook Maintained
NPS Pharma still expects net sales in the range of $100 million to $110 million. The company said that it is well on track to achieve the guidance as Gattex sales have totaled $40 million in the first half of the year. Operating expenses (excluding cost of goods sold and share-based compensation expense) in 2014 are still projected in the range of $180 million to $200 million.
We are impressed by the rebound in Gattex sales from the disappointing first quarter. We expect Gattex sales to remain strong in the last two quarters of the year. A key action date for NPS Pharma is coming up in October when the FDA will decide on Natpara (hypoparathyroidism). Prior to that, the FDA’s advisory committee will meet on Sep 12 to review the marketing application of the drug. We expect investor focus to remain on its regulatory status. Natpara approval will augment the company’s top line and reduce its dependence on Gattex. Focus will also remain on the development of NPSP795 (autosomal dominant hypocalcemia: phase IIa).
NPS Pharma, a biopharmaceutical company, carries a Zacks Rank #4 (Sell). Better-ranked stocks in the biopharma sector include BioMarin Pharmaceutical (BMRN) and Alexion Pharmaceuticals (ALXN). Both stocks carry a Zacks Rank #2 (Buy).
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