Will the $20 million payment for VIBATIV pay off? (THRX, JNJ, ALPMF)

The FDA is anticipated to decide on 11/26/09 for Vibativ (telavancin) as a once-daily injectable antibiotic for the treatment of hospital-acquired pneumonia (HAP). This triggers a milestone payment of $10M from THRX’s partner, Astellas Pharma (ALPMF.PK). On November 5, 2009, Theravance, Inc. (NASDAQ:THRX) announced that the company, in collaboration with Astellas Pharma Inc. (PINK:ALPMF) will launch the first stock of VIBATIV™ in the US market.  The announcement follows the approval of the drug by the U.S. Food and Drug Administration (FDA) on September 11.

In early October, Theravance disclosed the “milestone payment of $20 million” that they received from their partners, Astellas Pharma US., a US affiliate of Astellas Pharma Inc., Japan’s second-largest drug-maker. The payment was received for the FDA approval and for supplying Astellas with “the launch inventory of the first commercial sale of VIBATIV in the US”.

Theravance, a leading biopharmaceutical company, specializes in the development and commercialization of small molecule medicines. Its development programs mostly focus on respiratory diseases, bacterial infections, and gastrointestinal disorders. It entered into collaboration with Astellas in November 2005. The terms of the collaboration specify that Astellas will manufacture and sell VIBATIV while Theravance will help in marketing the drug for the first three years post approval.

VIBATIV, also known as “telavancin”, was discovered in a research program carried out by Theravance. The drug can be given once daily to patients suffering from “complicated skin and skin structure infections (cSSSI)” caused by susceptible isolates of the following gram-positive microorganisms: Staphylococcus aureus (including methicillin susceptible [MSSA] and resistant MRSA. The approval of the Vibativ (televacin) by FDA was based on data from two double-blind random Phase III trial where the drug showed its safety and efficiency in clinical trials on patients suffering from various skin structure infections and strains However, there were cases of some adverse reactions such as “taste disturbance, vomiting, nausea and foamy urine”.

“With the launch of VIBATIV, physicians now have an important and welcome addition to the current armamentarium for the treatment of cSSSI. We desperately need new antimicrobial agents to bridge the therapeutic gap created by increasingly resistant microbes. VIBATIV is specifically designed to solve this problem among resistant Gram-positive bacteria such as MRSA,” said Dr. Robert C. Moellering, Jr., Shields Warren-Mallinckrodt Professor of Medical Research at Harvard Medical School.

However, according to Zacks Equity Research, VIBATIV will face tough competition from other antibiotic drugs, such as ViroPharma’s Vancocin and Johnson & Johnson (NYSE:JNJ) ceftobiprole. The market analyst also predicted “an initial slow sales ramp of VIBATIV”.