West Coast Editor

With news that its deal with Aventis Pharmaceuticals Inc. to develop Picovir (pleconaril) is being terminated by mutual agreement, ViroPharma Inc.'s stock took another trouncing - and the company disclosed plans to restructure, cutting its work force by 63 percent.

"Today is the day when we begin to look forward again," said Michel de Rosen, ViroPharma's president and CEO, during a conference call for investors.

Recent months have been "a tough period for our company and clearly for our shareholders," de Rosen said. "Obviously, we believe our company has considerable value. The challenge is for us to demonstrate that value to you in very real and tangible ways."

ViroPharma's stock (NASDAQ:VPHM) closed Thursday at $1.14, down 39 cents, or 25.5 percent. In May, the share price fell 21.7 percent, closing at $3.33, when ViroPharma got word from the FDA that the agency would issue a non-approvable letter for Picovir. (See BioWorld Today, May 13, 2002.)

Under the terms of the mutually agreed Picovir stoppage, ViroPharma is returning $20 million in advance milestone payments to Aventis, of Bridgewater, N.J., which in turn will pay back ViroPharma for Aventis' share of development and commercial costs, as well as ViroPharma's detailing fees through August.

Aventis, as part of the termination deal, bought 3 million shares of ViroPharma stock for $4.6 million - which didn't sit well with one participant of the conference call, who asked if Rosen had "entertained the possibility of selling the company, or enhancing shareholders' equity in any way? So far, the shareholders have been devastated, and instead of buying back shares, you're issuing more shares."

Vincent Milano, ViroPharma's chief financial officer, answered the question.

"What we were trying to do is find an amicable conclusion to our relationship with Aventis," he said, and de Rosen said any buyout offers would be taken to the company's board for consideration.

Kori Beer, director of corporate communications for the company, told BioWorld Today after the conference call that "it's important to note that when we signed the deal, we got $20 million in up-front payments, $10 million of which was due back [to Aventis] in December if we didn't get approval, and another $10 million of which was due in March if we didn't get approval" - so ViroPharma could have lost the $20 million.

"That didn't happen," she said. Although the up-front money was returned, "we got essentially $20 million back, between the stock sale and the [sale of] the sales force" to Aventis for about $15.4 million, which also is part of the deal, she noted.

The 200-person force, included in the 63 percent reduction, already promotes Aventis respiratory products Nasacort AQ (triamcinolone acetonide) and the Allegra (fexofenadine HCl) family, and will continue to do that.

Picovir's problems - and ViroPharma's - began more than two years ago, when ViroPharma's stock dropped 68 percent after Phase III pleconaril results turned up not statistically significant in viral respiratory infection in adults and viral meningitis in adults and children. Shares closed down $48.50, at $23.25. (See BioWorld Today, April 12, 2000.)

This spring, an FDA panel voted 15-0 against recommending approval in the common cold indication. Before that, shares were trading at $13.41. The unanimous vote surprised some analysts, who still expected a closer call. (See BioWorld Today, March 20, 2002.)

ViroPharma, which follows a recent trend in the industry toward restructuring after product failures, said it won't push Picovir without a new partner, but with about $201 million in cash as of June 30, the firm expects to have enough as of the start of 2003 to last another three years, de Rosen said.

"It goes without saying, cash is king," he added.

Cash burn, before a one-time restructuring charge and interest expense on convertible notes, will be reduced to an average of less than $3.5 million per month through the end of 2005, ViroPharma estimated, compared to an average of $6 million per month over the first six months of 2002. The restructuring charge of approximately $4 million will show up on the books in the third quarter of this year.

Income for the third quarter is expected to be about $19.4 million, and a preliminary look at second-quarter results suggests they will reflect operating expenses to be within the previously estimated $16 million to $18 million range, the company said.

ViroPharma's board also has approved spending up to $20 million to buy a portion of its $180 million in convertible notes that, based on current prices, is worth about $63 million altogether.

Although Picovir was important, the firm has other products in the works. With Wyeth Inc., of Madison, N.J., it has a collaboration for hepatitis C compounds, and expects to have the lead product in Phase I studies by the end of this year, advance more into preclinical testing, and begin clinical trials late next year. (See BioWorld Today, June 20, 2002.)

In respiratory syncytial virus, ViroPharma plans to put its lead product into Phase II studies in infants by the end of this year, get at least one backup RSV candidate into human trials in 2003, and find a worldwide partner for the program.

De Rosen, in the conference call, said ViroPharma is investigating what it calls a "fourth front" - an additional focus that might bring in more revenue in the future.

"We are right now evaluating additional therapeutic areas for us to narrow down to one that we feel would add the most value to our existing pipeline," he said.