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THRX - Theravance


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Do you think this is a temporary issue which can be fix or a big issue where competition just have a better and cheaper drug?

 

Undervalued,

 

I think it's still too early, but given Advair's lasting franchise into 2016 (when the patent to device expires), I don't see much incentive for GSK to cannibalize it full-swing w/ Breo & Anoro. I think the cocktail strategy makes sense, I think the market won't shrink, and I think Ellipta as a universal device has both economic and sticky appeal, but I am skeptical of THRX getting to the peak numbers any time soon.

 

Meanwhile we get paid 5% dividend to wait, so why not.

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Can someone give me a bear thesis for THRX at this current stage? I think there is a lot of tailwind and margin of safety at this price, especially if you're planning to hold it to the end of 2029.

 

can you explain the bull case? All i see is a shell of a company with debt from the TBPH spinoff.

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Looking at this article from SA, http://seekingalpha.com/article/3039656-volatile-theravance-inc-offers-attractive-total-returns-potential.

 

 

 

So currently GSK has about 7bill sales coming from Advair. Let say THRX is only selling about a third of that which is about 2.0b starting 2017.. with 15% royalties on that 2b, it will annually generates 300m of revenue. Let say sales goes flat until 2029 and annual expense is about 70mil, net income is about 230m for 15 years. This is just a rough estimate.. maybe totally off.

 

Let me know if I am waaaay off.

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Looking at this article from SA, http://seekingalpha.com/article/3039656-volatile-theravance-inc-offers-attractive-total-returns-potential.

 

 

 

So currently GSK has about 7bill sales coming from Advair. Let say THRX is only selling about a third of that which is about 2.0b starting 2017.. with 15% royalties on that 2b, it will annually generates 300m of revenue. Let say sales goes flat until 2029 and annual expense is about 70mil, net income is about 230m for 15 years. This is just a rough estimate.. maybe totally off.

 

Let me know if I am waaaay off.

 

I don't know if you can assume the sales are flat until 2029. TBPH and GSK are partnering to bring the "triple" to market starting 2018. It's basically LABA + ICS (Advair, Breo, Symbicort, or Dulera) and a LAMA (Spiriva or Incruse). So I think the sales of the triple will cannibalize existing sales of the BREO and ADVAIR because it's a drug that only has to be taken once a day. And even if it did have net income of 230 for 15 years starting 2017, THRX's market cap right now is 1.8 Billion with 500 million in debt so it would have to spend the first few years just paying off the debt before shareholders saw anything. I don't see a big MOS here but maybe you could expand.

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My thinking on this is that first of all THRX owns 15% of the economic interest in the triple.  So a baseline royalty of between 0.98% and 1.5% on sales.  But also the idea behind splitting TBPH and THRX was that one would focus on royalty management and the other would focus on R&D of new pharma products.  Now, they have separate boards and mgmts, but it seems an implication that should THRX establish sufficient cash flow coverage of the dividend in the next couple years, that they might consider issuing debt and buying additional interest in the triple.  That might be trying run before walking since they're not yet able to cover the dividend but the trajectory looks to be there.

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Pretty detail/interesting article about GSK pipeline http://seekingalpha.com/article/3510856-glaxosmithklines-respiratory-line-not-dead-at-all.

 

Am I the only one following THRX now?

 

I just started a small position. Significant risk of a blow up as I see it.  Breo/ Anoro are not niche products . GSK will have to kill Advair to make these the new alternatives. If they succeed in doing so, it has significant upside.

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They just announced earnings and plans buy back.

 

http://investor.thrxinc.com/releasedetail.cfm?ReleaseID=939052

 

Theravance also announced today the acceleration of its capital return plan with a $150 million share repurchase plan effective through the end of 2016 that was approved by the company's Board of Directors, replacing its quarterly dividend. The company currently intends to repurchase its shares over this period through a combination of a tender offer and open market purchases, and may also repurchase shares through private transactions, exchange offers, additional tender offers or other means. The repurchase program will be funded using Theravance's working capital. The repurchase program may be suspended or discontinued at any time. Theravance had approximately 117.4 million shares of common stock outstanding as of October 27, 2015.

 

Did they just replace the dividend with purchase program?

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