Theravance Inc (THRX), GlaxoSmithKline plc (ADR) (GSK): Time to Bet on This Biotech Spinoff?

The challenge posed by LAMA/LABAs has forced makers of traditional COPD/asthma treatments such as Symbicort of AstraZeneca plc (ADR) (NYSE:AZN) to shift focus. The British pharmaceutical giant acquired a respiratory specialist company, Pearl Therapeutics in June 2013, apparently for maintaining its position in the COPD market.

My take
Theravance Inc (NASDAQ:THRX) presently has two triggers — the spinoff and the positive results of TD-4208. Vibativ, for treatment of hospital-acquired and ventilator-associated bacterial pneumonia and other infections, is the company’s only marketed product. The recently approved Breo Ellipta is a partnered product.

Even though revenue has been non-existent over the last 12 months, the company has a comfortable cash position with $443 million in the bank. With a cash burn of approximately $130 million in 2012, it has adequate reserves to last for three years.

Apart from its respiratory candidates, the company’s pipeline comprises of three other drugs in mid-stage trials — one each for bacterial infection, opioid induced constipation, and gastrointestinal dysfunction.

If the company is split into two, the new company that retains the royalty portfolio may be able to provide good consistent returns, but there is little or no scope for growth without further approvals. The company that retains the drug discovery arm of Theravance Inc (NASDAQ:THRX) is totally dependent on future outcome of experimental drugs, all of which are in early- to mid-stage development and difficult to assign any real value.

The article Time to Bet on This Biotech Spinoff? originally appeared on Fool.com.

Kanak Kanti De has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 

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