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NPS Pharma Blames Winter, Drug Stops for Weak First Quarter, Reduced Guidance

NPS Pharmaceuticals (NPSP) reported first-quarter net sales of Gattex totaling $17.9 million, a consensus miss which the company blames on bad winter weather and a rise in the number of patients discontinuing therapy.

The slow start to the year means NPS Pharma is also reducing Gattex sales guidance for the year to a range of $100-110 million from $110-120 million. The current Gattex sales consensus estimate for 2014 is around $120 million.

NPS shares are off 17% to $22.50 in pre-market trading. 

Gattex treats short bowel syndrome, a chronic and disabling condition that strikes people, who for various reasons including Crohn's disease, have about 50% of their lower intestines surgically removed, forcing them to rely heavily on intravenous parenteral nutrition. Gattex is a given as a shot under the skin and boosts the ability of the intestine to absorb nutrients.

NPS Pharma is the second marketer of drugs for rare, orphan disease in the past two days to report weaker-than-expected sales in the March quarter and take down financial guidance. Wednesday, Aegerion Pharmaceuticals (AEGR) did the same thing and its stock fell 22% to $34.63 as a result

Gattex's sales miss for the first quarter was only $1.5 million, not huge, and the company says sales metrics bounced back in March and April. If the Gattex slowdown is no longer a problem, why is NPS Pharma cutting $10 million in Gattex revenue from its year-end forecast? 

"We're a conservative company. I'd rather under promise and over deliver," said NPS Pharma CEO Francois Nader, in an interview Wednesday night. 

That may be true but expect investors to focus on the rising Gattex discontinuation rate as a potential hot spot. Approximately 10% of patients stopped Gattex therapy at the end of the year. The discontinuation rate in the first quarter was higher although NPS Pharma will not disclose the exact number. 

"We always expected the [Gattex] discontinuation rate to increase over time to between 20-30%, but the increase in the first quarter impacted sales," said Nader. He adds that patients stop taking Gattex because of gastrointestinal side effects (abdominal pain, nausea and vomiting), and because they wean themselves off the drug after reducing parenteral nutrition.  [These latter patients might return to Gattex when they once again require parenteral nutrition.]

In an interview conducted for investor clients of J.P. Morgan on March 27, Nader discussed the Gattex discontinuation issue but made no mention of higher rates in the first quarter negatively impacting sales or forcing the company to reduce 2014 guidance, according to a transcript. 

NPS Pharma's net loss for the quarter narrowed to $6.6 million, or 6 cents per share, compared to a net loss of $7.8 million, or 9 cents per share, one year ago. Total revenue in the quarter was  $44 million, which is comprised of product sales and royalties. In the year-ago quarter, total revenue was $25.4 million. 

NPS Pharma shares closed Wednesday at $27.04, ahead of the earnings announcement. 

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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