VPHM - Sector: Healthcare---Industry: Biotechnology & Drugs

[Melf Elf]

ViroPharma Provides Financial Outlook for 2007

2007 Net Product Sales Expected to Grow to $195 to $205 Million; Company to
Increase Expenses to Advance Clinical Programs and Support Vancocin Growth

Oliver,

Thanks for that news.  Applause.  Did it come out before the market close, or after?

EDIT: Okay, Oliver, I see that the news came out after the close.  Thanks.

Now we want to see the market's reaction to that news.

In the weeks ahead of The St. Paddy's Day Massacre, VPHM didn't react at all well to good news, breaking chart support, putting in "Gaps To Crap," etc.

Since the summer low of 7.07, VPHM has responded well to good news, and has rallied.

We want to pay attention to any sea change in VPHM's response to good news.

Looks very inticing on the surface.  The trouble with VPHM has always been valuation.  Because vanco is unpatented and the FDA is, as of today, willing to permit a showing of equivalence without clinical trials, VPHM could easily drop to single digits in one day again, if the FDA denies VPHM's "appeal."  Too much risk here for me. 

buddjas,

I hear ya.   

These stocks can be very rewarding on the upside, like VPHM has been since the summer low, but they also can be brutal on the downside on any disappointment, like DVAX yesterday, which got whacked for a 30% loss.

I'm always glad when targets get MADE, so I can take some off the table and give myself some measure of safety, "just in case."

I've got a 19.5% gain in VPHM on the 50% that I've sold since I bought it two months ago, so hopefully, I'll come out with a nice winner, but I can understand why you'd rather avoid the risk in VPHM, and in similar stocks. 

[Melf Elf]

Now we want to see the market's reaction to that news.

If a gap up opening does much more than come back and fill the gap from the prior day's high, there's always a concern that it's a "Gap To Crap."

The opening was 14.83, with a quick tick of 14.85, then to slide began immediately, toward yesterday's high of 14.64.

The low this morning came in at 14.60, filling the gap, and we're now printing new highs on the day.  That kind of reaction to Oliver's good news looks fine, so far.

Players saw that the gap was filled, and were willing to step in and buy it, and now at new highs, they're also showing willingness to pay a price higher than the gap up opening.

[la-onda]

Briefing.com
Live In Play
09-Jan-07
07:28 VPHM ViroPharma: 2007 guidance issued; Vancocin sales steady -
TWP (14.42 )

Thomas Weisel notes VPHM announced that 2006 Vancocin sales will be
within the co's previous guidance range of $162 - $170 mln. Firm
notes that according to an analysis of I.M.S. sales data, Vancocin
sales could have potentially come in above the VPHM's guidance
(about $173 mln).They note that mgmt believes, however, that
wholesaler inventories were drawn down at the end of the year. The
co also issued initial revenue and expense guidance for 2007. Given
the increased uncertainty regarding the timing of a generic Vancocin
approval, firm believes VPHM should trade at a discount to its
peers. However, they believe that the current discount is
unjustified, as the recent positive phase II results for maribavir
bode well for the longer term growth prospects for the company.

&

ViroPharma's Healthy Sales Guidance

http://www.fool.com/investing/value/2007/01/09/viropharmas-healthy-sales-guidance.aspx

Brian Lawler
January 9, 2007

For most companies, the start of a new calendar year also coincides with the beginning of a new fiscal year and the accompanying financial forecasts for the upcoming quarters. Yesterday, drug developer ViroPharma (Nasdaq: VPHM) became the latest company to give its 2007 guidance for sales and expenditures.

Absent any potential generic competitors entering the market for its only marketed drug, the antibiotic Vancocin, ViroPharma is expecting another strong year of sales growth, with sales up at least 15% over 2006.

ViroPharma guided for gross margins in excess of 90% on its Vancocin sales, a small window into how earnings could wind up for the company next year. At the midpoint of its sales and expenditure numbers, this would bring 2007 operating income to at least $114 million, excluding stock-based compensation. Applying a 35% tax rate to this income would give ViroPharma approximately $75 million in expected net income, or a little more than $1 in earnings per share for the coming year.

Based on my estimates, ViroPharma is trading at a cheap 14 times 2007 earnings, and with more than $220 million in cash and short-term investments on the balance sheet, it has more than $3 of its share price covered by this cash. It will be interesting to see what ViroPharma spends this growing cash pile on, considering management's ability to be an astute in-licenser of drugs in the past with its acquisitions of Vancocin and Maribavir.

With one promising drug candidate in phase 3 trials, and another in phase 2 trials to treat hepatitis C, ViroPharma has a lot going for it -- assuming it can fend off any possible generic entrants against Vancocin. Another risk to watch out for is Genzyme's (Nasdaq: GENZ) competing drug, which will be completing phase 3 trials this year and could be on the market as soon as 2008. If it shows superior efficacy compared to Vancocin, that could also be bad news for ViroPharma shareholders in the short run, until the company gets Maribavir onto the market. Either way, this small-cap pharmaceutical stock is worth taking a look at just for its cheap valuation.

[Melf Elf]

The low this morning came in at 14.60, filling the gap, and we're now printing new highs on the day.  That kind of reaction to Oliver's good news looks fine, so far.

VPHM ended up coming back to the gap, breaking 14.60, and going down to 14.40. 

I never like anything like that.  The gap already was filled, so why did it need to go back down, and fill it again?   

Curses!   

After I stopped ranting like a maniac, I tried to find an answer, and there was a very good one: VPHM came back to 14.40 to nail a re-retest of the Bullish Falling Wedge exactly, which was at 14.405.

Oh-h-h... where's that Embarrassed Face? > > 

The Bullish Falling Wedge breakout has 15.59 IN PLAY, and 16.30 IN PLAY.

I'm raising the stop on my remaining ½ position, to 13.89, below last week's low.  I've been holding VPHM for two months and want a nice profit.  That would give me 15% gain on the trade.

I'm raising my stop again to 14.39, below the successful 14.40 re-test of the Bullish Falling Wedge.

Excluding a gap down, that locks me in to a 17.2% gain of the entire trade.

[la-onda]

 Rodman & Renshaw, LLC Initiates Coverage of ViroPharma, Inc. With A Market Perform Rating

Analyst Initiates with Market Perform Rating
NOTE TO EDITORS: The following is an investment opinion issued
by Rodman & Renshaw, LLC

NEW YORK--(BUSINESS WIRE)--Rodman & Renshaw, LLC initiated research coverage of ViroPharma, Inc. (NASDAQ: VPHM) with a Market Perform Rating. Ilya Kravets, Senior Specialty Pharmaceuticals Analyst, issued the report.

About Rodman & Renshaw, LLC

Rodman & Renshaw is a privately held, full-service investment bank committed to fostering the long-term success of growth companies through capital raising, strategic advice, insightful research, and the development of institutional support. More information is available at www.rodmanandrenshaw.com

None of the research analysts or the research analyst's household has a financial interest in the securities of ViroPharma, Inc. (including, without limitation, any option, right, warrant, future, long or short position).

As of December 31, 2006, neither Rodman & Renshaw, LLC nor its affiliates beneficially own 1% or more of any class of common equity securities of ViroPharma, Inc.

Neither the research analyst nor Rodman & Renshaw, LLC has any material conflict of interest with ViroPharma, Inc., of which the research analyst knows or has reason to know at the time of publication of this research report.

Rodman & Renshaw, LLC or its affiliates did not receive compensation from ViroPharma, Inc. for investment banking services within the last twelve months and Rodman & Renshaw, LLC intends to seek compensation from ViroPharma, Inc. for investment banking services within three months, following publication of the research report.

Neither the research analyst nor any member of the research analyst's household nor Rodman & Renshaw, LLC serves as an officer, director or advisory board member of ViroPharma, Inc.

Rodman & Renshaw, LLC does not make a market in ViroPharma, Inc. securities as of the date of this research report.

The above information is not intended to be used as a primary basis of investment decisions. It is not a representation by Rodman & Renshaw, LLC or an offer or the solicitation of an offer to buy any security. Before investing in ViroPharma, Inc., you should carefully consider your risk tolerance and financial objectives.

[Melf Elf]

VPHM is very well positioned, technically, to benefit from good news on the fundamentals, like XING was last week when the Dutton analyst gave it an upgrade.

If you scoll up and look at my last post on January 12, VPHM had broken out of a Bullish Falling Wedge.  It's fairly common for those to morph into a Bullish Inverse H&S pattern, which more frequently are seen at market bottoms, but they also can show up at high levels of consolidation, as it appears here.

This particular pattern is a DOUBLE Inverse H&S (one "nested" within the other), and it has formed right below Major Resistance from the St. Paddy's Day Massacre, 15.55-15.56.

In addition, basis the Ichimoku Kinko Hyo chart, we can "See at a glance...the table of balance" that:

1. VPHM pulled back from the neckline, found support at the 22-day (solid red line)

2. It also found support above the Kumo (Cloud), the vertical green lines.

3. The 8-Day (solid green) and 22-Day have had a Bullish Cross

4. Friday's candle was a Bullish Hammer off that support (needs upside follow-thru).

That's very nice. 

After 10-months of Crash recovery, and recent consolidation below resistance, that kind of pattern is "packing some punch" to finally make a move higher, into the resistance area.

The MACD also is well positioned for a "slap shot," or a "bump and run higher" (see next post).

[Melf Elf]

If we visualize the MACD (solid red) as a hockey puck, and the signal line (dotted red) as the hockey stick, we can see that the "puck" is sliding back toward the "stick," beautifully position for a "slap shot" into the goal, just as it was last November, when VPHM had a nice rally to the 15.55-15.56 Major Resistance.

[Melf Elf]

Indicated 3% higher on news that it will be added to the S&P Small Cap 600 on January 25.

[Melf Elf]

This particular pattern is a DOUBLE Inverse H&S (one "nested" within the other), and it has formed right below Major Resistance from the St. Paddy's Day Massacre, 15.55-15.56.

This is looking so-o pretty.

VPHM currently is BID 15.55...ASK 15.56, right at that major resistance.

The high of the pattern is 15.68, so this rally needs to hold up, and that needs to get taken out to the upside.

[Melf Elf]

This particular pattern is a DOUBLE Inverse H&S (one "nested" within the other), and it has formed right below Major Resistance from the St. Paddy's Day Massacre, 15.55-15.56.

This is looking so-o pretty.

VPHM is capitalizing on the breakout of the DOUBLE Bullish Inverse H&S pattern that formed just below that Major Resistance (see daily chart, next post).

It's currently trading above $16 for the first time since the St. Paddy's Day Massacre, headed for the breakout target of 16.95 IN PLAY.

[Melf Elf]

DOUBLE Inverse H&S breakout above Major Resistance at 15.55 - 15.56. 

16.95 is IN PLAY.

[Melf Elf]

Prior to morphing into the DOUBLE Bullish Inverse H&S that broke out to the upside this week, VPHM broke out of a Bullish Falling Wedge (pattern in purple) that put 15.59 IN PLAY, and 16.30 IN PLAY.  Both targets MADE in yesterday's rally, within one penny. 

The high was 16.29, and VPHM finally closed above that daunting 15.55-15.56 St. Paddy's Day Massacre resitance, on the highest volume (8 million shares) since the positive Hep C results on August 29 of last year.

Structurally, since blasting out of the Bullish Inverse H&S Island Reversal (with No Right Shoulder) on August 24, 2006 VPHM has been a thing of beauty, technically, as the patterns have evolved and broken out, support has been re-test and held, and targets have gotten MADE.

Earnings should be coming up soon, and we never know how the market will respond to them, but based soley on the fine technical job that VPHM has done, it should be rewarded for it.

The chart of VPHM, both going into the St. Paddy's Day Massacre, and coming out of the Crash Recovery, is a great study for technicians.

Scores for Technical Merit:




...10...10...10...10...10...10...11...



Judge #7 is Melf Elf, who is a total sucker for beautiful chart structure. 

[Melf Elf]

If we visualize the MACD (solid red) as a hockey puck, and the signal line (dotted red) as the hockey stick, we can see that the "puck" is sliding back toward the "stick," beautifully position for a "slap shot" into the goal, just as it was last November, when VPHM had a nice rally to the 15.55-15.56 Major Resistance.

We got the "slap shot" into the goal (over 15.55-15.56 Major Resistance).

If VPHM should have a rally as good as the one off the November "slap shot" signal,  that would put it, roughly, at 17.74, well above the 16.95 DOUBLE Bullish Inverse H&S target IN PLAY.

There's no reason, technically, to expect the percentage gain to be the same, but it would seem that coming out of a nice pattern breakout like this, the target certainly ought to get MADE, and quite possibly exceeded on this rally.

One never knows, with earnings on the wing, but I'll hold VPHM through earnings if the target hasn't MADE.

[la-onda]

struggling with my move to Singapore (arrived  )
still no Internet @ home 

thanks for the updates Melf Elf
cheers
Oliver

24-Jan-07
06:21 CALLS Early Research Calls I

... Susquehanna initiates ViroPharma (VPHM 15.51) with a Positive, as they believe maribavir has the potential to expand the cytomegalovirus market and favor the co's work on a non-nucleoside  polymerase inhibitor for HCV with partner Wyeth...

[Melf Elf]

Bought VPHM at 12.58 on the 34/55RSI Buy Signal.  Stop: 12.19.  Risk: a loss of 3.1%.

Friday's low of 12.21 was a validation of the trendline off the July 7.07 low.  I like that.

Sold remaining 50% VPHM at 16.99.  Gain: 35%.

DOUBLE Inverse H&S breakout above Major Resistance at 15.55 - 15.56. 

16.95 is IN PLAY.

16.95 MADE.

struggling with my move to Singapore (arrived  )
still no Internet @ home 

thanks for the updates Melf Elf

You're welcome, Oliver.  Hope that you're getting settled in Singapore!