On Monday, September 24, analysts at Wells Fargo & Co. upgraded shares of ViroPharma Inc. (VPHM). The firm raised its rating on the stock from a Market Perform to an Outperform and did not set a price target. As a result of the upgrade, shares of VPHM reacted quite flat, trading up roughly 1.00% since the opening of trading on Monday. That said I wanted to examine the company a bit further and take a look at how it compares (and outpaces) to some of its industry-based competitors in terms of profit margin and operating margin. The three companies within the Biotech sector I chose to compare with ViroPharma, Inc. are: Dendreon Corp. (NASDAQ:DNDN), Pfizer (NYSE:PFE), and Novartis AG (NYSE:NVS).
Overview: ViroPharma, Inc.
ViroPharma Incorporated, a biotechnology company, develops and commercializes therapeutic products that address serious diseases in the United States and internationally. It focuses on developing products used by physician specialists or in hospital settings. The company markets and sells Cinryze, a C1 esterase inhibitor therapy for the routine prophylaxis against angioedema attacks in adolescent and adult patients with hereditary angioedema, a life-threatening genetic disorder; and Vancocin HCl capsule, an oral capsule formulation for the treatment of C. difficile-associated diarrhea (CDAD) and to treat enterocolitis caused by staphylococcus aureus, including methicillin-resistant strains. It also offers Plenadren, an orphan drug for treatment of adrenal insufficiency in adults; Buccolam, a oromucosal solution for treatment of prolonged, acute, and convulsive seizures in infants, toddlers, children, and adolescents; and maribavir, an antiviral compound for the treatment of CMV disease through a license agreement with GlaxoSmithKline. The company's primary development programs include Cinryze, a C1 esterase inhibitor for management of hereditary angioedema; and VP 20621, a non-toxigenic strain of C. difficile. Its clinical stage drug candidate comprises VP-20629 for the treatment of Friedreich's Ataxia. The company sells its products directly to wholesale drug distributors and specialty pharmacies/distributors. ViroPharma Incorporated was founded in 1994 and is headquartered in Exton, Pennsylvania.
The Profit Margin Comparisons of ViroPharma, Inc.
As a whole, and in my opinion, the Biotech sector has one of the most diverse ranges of profit margins when compared to some of the other industries I've written articles on. For example, there are a total of three biotech companies ViroPharma, Inc. actually outpaces quite substantially. The first of these companies is Dendreon Corp. In the last 12 months ViroPharma has demonstrated a positive profit margin of 18.73%, whereas Dendreon has demonstrated a negative profit margin of -72.13%. Comparatively speaking VPHM outpaces DNDN by a ratio of 4.85 to 1. The next two companies ViroPharma clearly outpaces are Pfizer which demonstrated a profit margin of 15.76% and Novartis which demonstrated a 14.80% profit margin. By examining those numbers a bit closer we'll notice that the comparative ratios to both Pfizer and Novartis are 1.18 to 1 and 1.26 to 1, respectively.
The Operating Margin Comparisons of ViroPharma, Inc.
As was the case with profit margins, and in my opinion, the Biotech sector also has some of the most diverse operating margins I've seen since I've started writing. For example, ViroPharma, Inc. actually outpaces the previously mentioned three companies quite substantially. The first of these companies is clearly Dendreon Corp. In the last 12 months ViroPharma has demonstrated a positive operating margin of 35.39%, whereas Dendreon has demonstrated a negative profit margin of -50.63%. Comparatively speaking VPHM outpaces DNDN by a ratio of 2.43 to 1. The next two companies ViroPharma clearly outpaces are Pfizer which demonstrated an operating margin of 30.39% and Novartis which demonstrated a 20.89% profit margin. By examining those numbers a bit closer we'll notice that the comparative ratios to both Pfizer and Novartis are 1.16 to 1 and 1.69 to 1, respectively.
Should potential investors jump at the chance to establish a position in ViroPharma, especially after the Wells Fargo & Co. upgrade? From a comparative standpoint with regard to the company's margins relative to some of the biggest names in the biotech sector, I think the numbers present a solid opportunity and I'd keep an eye out for continued FDA developments, which was the case Friday as it was noted that "The FDA allows ViroPharma to restart clinical trials of the subcutaneous injection of its Cinryzed drug in combination with rHuPH20, a platform for administering medicines in this way. The agency believes 'safety signals' regarding antibodies to rHuPH20 detected in another company's product development are limited to that product's program".
Disclosure: I am long VPHM, NVS, PFE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.