Beating the Flu Bug—and Earnings Estimates

02/17/2010 12:00 pm EST

Focus: STOCKS

Michael Murphy

Former Editor, New World Investor

Michael Murphy, editor of New World Investor, says BioCryst had blowout earnings recently because of a promising drug to treat critically ill flu patients.

BioCryst Pharmaceuticals (BCRX) shot up [recently] after [antiviral influenza drug] peramivir received the equivalent of an Emergency Use Authorization in Australia, good for five years. Presumably, a larger order than we’ve seen outside the US will follow.

BioCryst announced results [a couple of weeks ago], and reported $54.9 million in revenues, with net income of $15.2 million, or 35 cents a share. At the end of the quarter, they had $94.3 million in cash, or $2.15 per share.

The results exceeded even the highest estimates, including mine for 25 cents to 30 cents a share. The consensus earnings estimate was nine cents a share, but the range was from a loss of 28 cents to a profit of 28 cents. There also are six analysts with full-year projections for 2010, with an earnings range from a loss of $1.19 to a profit of $1.80.

The Department of Health & Human Services just published its Public Health and Social Services Emergency Fund—Justification of Estimates for Appropriations Committees, and on page 109 we find: “HHS has supported since 2007 development of the parenteral antiviral drug peramivir for critically ill persons with influenza. Additional funding was provided for advanced development of peramivir in Phase 3 clinical trials in September 2009 and acquisition of peramivir in November 2009 to establish a small federal stockpile during the 2009 H1N1 pandemic to treat critically ill persons with H1N1 infections. Over 1,000 persons have been treated successfully to date with this drug.”

Now, I am not sure what “treated successfully” means, but BioCryst thinks 1,500 to 2,000 courses have been shipped in the US, with many patients getting two courses.

My guess is around 1,100 to 1,200 patients have been treated, with over 1,000 survivors. That is a cure rate of 90% to 95%, but the Food and Drug Administration will not let BioCryst tell doctors what is going on.

[Recently there was a] mystery spike in US pneumonia and influenza deaths. A little checking showed that many of the deaths were in older patients, in sharp contrast to the pattern with H1N1 so far. That tells me the seasonal flu is here for its usual February peak, and hitting the elderly as it usually does.

The 8.1% death rate for hospital-admitted flu patients is higher than the peak levels in the fall [and] the peak week for all flu seasons but one since 2005-2006. The one exception was the 2007-2008 season, when there was a 9% peak week.

The difference this year is that [intensive care unit doctors] can assume it is H1N1 and use peramivir to save lives.

BCRX remains a Top Buy up to $11 for my $30 short-term target after more orders are announced. (The stock closed above $7 Tuesday—Editor.)

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