Summary
- Theravance Biopharma continues to be guilty by association, and this is following Theravance downwards.
- The company’s Q3 report actually contained a few very positive statements, hinting to less well-known sources of value.
- As the old put limit (expired in 2007) apparently continues to attract traders, I still believe that the sell-off is happening without any fundamental reason.
Theravance Biopharma (NASDAQ:TBPH) released its Q3 report after the bell on Thursday, 11/06, causing yet another sell-off early on Friday. After trading quietly during the first 30 minutes, the stock crashed 10% before it recovered most of the losses, closing down 2.12% at $17.07. This represents a large drop compared to the price level five weeks ago, when my first article on the company was published.
So what caused the sell-off, and what caused the reversal? The losses reported probably were not the reason, as they were widely expected, and the company even managed to beat expectations on revenue and on EPS. This seems to be confirmed by the quite relaxed first market reaction. My best guess is that some traders had hoped for positive surprises related to the programs partnered with GlaxoSmithKline (NYSE:GSK), but were disappointed by a Q3 report focusing almost entirely on programs nobody has ever talked about (I excluded them from my valuation as well). In fact, TBPH has a rather interesting pipeline, and earlier this week, surprised investors with positive results for a hepatitis C drug nobody knew about. In addition, the Vibativ launch is progressing well. The positive data on TD-4208 was already public, but few investors are probably aware of the intrinsic potential of this drug, which could become the only once-daily LAMA available for nebulized COPD maintenance therapy, targeting 9% of all COPD patients in the US.
If my guess is correct, TBPH once again suffered from being closely associated with Theravance and the doubts Mr. Market has on its ongoing drug launches. Traders impatiently want to see results or at least positive announcements related to the GSK drugs, but got “only” news on assets they know little about (and care even less). Interestingly, the sell-off stopped a few percentage points after the old $19.37 limit. This was the put option price at which Theravance investors could put their shares to GSK until 2007 – and the combined price of Theravance and the spun-off TBPH as of Friday’s close ($14.27 + $17.07/3.5 = $19.14) seems to confirm that this old and totally meaningless price limit still exerts some attraction on traders. Investors focused on fundamental analysis should consider this a positive, as it shows how little the stock market appears to be interested in fundamental value. Given its pipeline and the price it is trading for ($212m net of cash), TBPH is unlikely to disappoint long-term investors.
Disclosure: The author is long TBPH, THRX. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha PRO helps fund managers:
- Research new investment ideas
- Reduce risk
Thank you for your interest in Seeking Alpha PRO
We look forward to contacting you shortly for a conversation.
Our PRO subscription service was created for fund managers, and the cost of the product is prohibitive for most individual investors. At this time, we do not yet have a subscription product for individual investors. If you'd like us to contact you when it's ready, please click here. If you are an investment professional with over $1M AUM and received this message in error, click here and you will be contacted shortly.
Thank you for your interest in Seeking Alpha PRO
We look forward to contacting you when we have an individual investor product ready!
For just $10/month, TBPH PRO Alerts subscribers receive:
- An early look at select articles on this stock, 24 hours before publication
- A summary of the author’s past performance on this stock
- Exclusive data about the author’s influence and credibility among Seeking Alpha readers
- Bullet-point summaries of articles on this stock, sent with each email alert