ViroPharma Inc (VPHM) appears to be an ideal stock. The company has grown revenues and shareholder equity every year since 2006. But the trailing performance can be misleading. While trailing P/E was 13.38, forward P/E is expected to be 35.21.
The company is facing pressure from generic manufacturers because of lost exclusivity on their key product Vancocin. In 2010, Vancocin represented 59.1% of total sales. The US District Court recent ruling against ViroPharma in a challenge that would have slowed competition from generics for Vancocin was a big, but not unexpected, blow to the company.
New drugs in the pipeline are expected to provide future growth. During the fourth quarter of 2010, Vancocin produced $67.8 million of sales and Cinryze generated $52.5 million in sales. In 2011, the company expects US Cinryze revenues of between $235 and $260 million. The company could see additional revenues in 2011 from the EU launch of Cinryze. In addition, positive results from ViroPharma's non-toxigenic C difficile and C1-INH clinical programs in 2011 could be a significant boost to the stock.
Based on these factors, ViroPharma faces an uncertain future. But one interesting thing to like about ViroPharma is management's significant stock ownership. Here is a summary of shares beneficially held by top executives
Management Stock Holdings
|Executive||Shares Beneficially Held|
|Vincent J Milano||733,043|
|Charles A Rowland||108,495|
|Thomas F Doyle||594,193|
To put these figures in perspective, Vincent Milano's 2010 compensation was $2.4 million. Based on a stock price of $20, CEO Milano's stock holdings are worth $14.66 million. At 6.1x his most recent compensation, Vincent Milano has a significant stake in the company.
While management stock ownership is not sufficient reason to buy or sell a stock, it is a useful variable. In this case, ViroPharma's management appears to be confident in the company's prospects. While this does not guarantee success, it should provide bullish investors with an additional reassurance and bearish investors with reason to question their thesis.
Data Source: 2010 Proxy
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.