Par Pharmaceutical, Inc.’s (PRX) proprietary products division, Strativa Pharmaceuticals recently faced a setback when MonoSol Rx and APR Applied Pharma Research S.A. announced that they will reacquire the US commercial rights to Zuplenz from Strativa. As a part of a licensing agreement with MonoSol Rx, Par Pharma had been marketing the product in the US since October 2010.
Additionally, MonoSol Rx and APR Applied Pharma said that they are looking for a partner to commercialize Zuplenz in the US.
Zuplenz, which was developed using MonoSol Rx's proprietary PharmFilm technology, is indicated for the prevention of postoperative nausea and vomiting (PONV), highly and moderately emetogenic cancer chemotherapy-induced nausea and vomiting (CINV), and radiotherapy-induced nausea and vomiting (RINV).
Zuplenz was one of the few drugs which was expected to drive growth at Par Pharma along with Oravig (launched in the second half of 2010) as well as propafenone and amlodipine/benazepril (both launched in the first quarter of 2011) at a time when the company recorded 20.2% lower revenues in the first quarter. Therefore, losing the rights to market Zuplenz in US might dent the revenues going forward.
MonoSol Rx’ decision to take back the US rights to Zuplenz comes almost a month after Par Pharma announced restructuring plans for Strativa. The company plans to reduce its workforce by about 100 people as a result of the restructuring, which will expectedly drive the Strativa business to profitability. The workforce reduction will also help Par Pharma focus on its products, Megace ES and Nascobal.
Consequently, in the second quarter of 2011, Par Pharma expects to incur one-time non-cash charges along with severance costs. The restructuring initiative is expected to generate operating expense savings of $8-$12 million for the rest of 2011.
Our Take
The stock carries a Zacks #3 Rank (Hold rating) in the short-run. We note that Par Pharma currently has around 30 Abbreviated New Drug Applications (ANDA) pending approval with the US Food and Drug Administration (FDA). Twelve of these are expected to be first-to-file opportunities, representing branded sales of about $8.0 billion.
We believe that even though competition has depleted sales of several generic products including the company’s generic version of AstraZeneca’s (AZN) Toprol XL, branded drugs like Oravig, propafenone and amlodipine/benazepril will help drive the top line.
Longer term, we have a Neutral recommendation on Par Pharma.
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