Theravance: income investors should watch this pharmaceutical stock

Theravance: income investors should watch this pharmaceutical stock

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It's been a rough year for pharmaceutical company Theravance, but the year ahead could be brighter.

At first glance, Theravance's (THRX) 44 percent drop in the past year is frightening, but this could be set to change. 
The company is in partnership with GlaxoSmithKline (GSK) to launch new drugs treating respiratory diseases, and share prices are now up close to 46 percent in the past month. It is possible that the stock has even more upside.

Weak year

Theravance's decline is due mostly to the fact that it spun off its R&D division, now Theravance Biopharma (TBPH), in June. This leaves Theravance proper (THRX) as a royalty company that will pay income investors a dividend of $0.25 per share this quarter, with an ex-dividend date of March 12. Theravance has the cash flow to support the dividend, because the company holds late-stage respiratory assets. Together with GSK, the firm is growing sales of Relvar/Breo Ellipta, earning $10.5 million in royalties on net sales of these products in Q4 2014, a 164 percent increase from the previous quarter.

Theravance Biopharma (TBPH) is a biopharmaceutical research and drug development company, fitting for investors interested in the volatility associated with companies researching new drugs. The stock's rebound is impressive: as of February 24 at 2:30pm, the stock is up 54.5 percent from its 52-week low in December.

Strong quarter

Investors should consider both Theravance Biopharma and Theravance, but for different reasons. Theravance’s dividend is supported by growing revenue. In its fourth quarter, the firm grew revenues by 387 percent, to $7.3 million. Expenses fell $7.2 million while losses per share shrunk by 75 percent. For the full fiscal 2014 year, Theravance’s revenue grew to $8.4 million.

On the company's fourth quarter earnings conference call, Theravance CEO Mike Aguiar noted the firm's disappointment in the sales derived from its collaboration with GSK. Despite last year’s headwinds, upcoming regulatory and clinical events should prove positive for Theravance’s BREO product. Sales for BREO, which treats COPD (chronic obstructive pulmonary disease) and asthma, should improve in 2015. It was approved in 58 countries as at December 31, 2014. Net sales of the product improved by 142 percent quarter-over-quarter in Q4.

Written by Chris Lau.

Disclosure: Author owns shares of Theravance.

Click on the interactive chart to view data over time. 

 

1. GlaxoSmithKline plc (GSK, Earnings, Analysts, Financials): Engages in the discovery, development, manufacture, and marketing of pharmaceutical products, over the counter (OTC) medicines, and health-related consumer products worldwide. Market cap at $114.55B, most recent closing price at $42.29.

 

 

2. Theravance Biopharma Inc. (TBPH, Earnings, Analysts, Financials): Focuses on the discovery, development, and commercialization of small molecule medicines primarily for the therapeutic areas of bacterial infections, central nervous system/pain, respiratory disease, and gastrointestinal motility dysfunction. Market cap at $664.90M, most recent closing price at $20.63.

 

 

3. Theravance Inc. (THRX, Earnings, Analysts, Financials): Engages in the discovery, development, and commercialization of small molecule medicines for various therapeutic areas, including respiratory disease, bacterial infections, and central nervous system (CNS)/pain. Market cap at $2.03B, most recent closing price at $17.48.

 

 

(List compiled by Chris Lau. Monthly returns data sourced from Zacks Investment Research. All other data sourced from FINVIZ.)

 

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