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ViroPharma Drops on FTC Probe, Generic Drug Rival

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Antibiotic maker faces questions about its competitive practices and generic competition from a just-approved product made by Watson Pharmaceuticals.

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Antibiotic maker ViroPharma (VPHM) is making news today and none of it is good for the company's investors.

Not only does ViroPharma now face generic competition for its lead product Vancocin, the US Federal Trade Commission is investigating whether the company "engaged in unfair methods of competition" when it sold the powerful antibiotic. Watson Pharmaceuticals (WPI) got the green light to sell generic Vancocin in the US despite ViroPharma's efforts to block approval.

Shares of ViroPharma fell 17% to $23.84 in midday trading Tuesday. The stock is still up more than 20% over the past six months. Watson fell 1% to $65.86 in midday trading. That stock has risen 10% this year.

ViroPharma says it plans to file a complaint in federal court in Washington, DC, seeking an injunction to halt the Food and Drug Administration approval of the generic drug, which is used to treat tough hospital infections. Exton, Pennsylvania-based ViroPharma argues that the generic Vancocin is not equivalent to the branded version because it doesn't use the same inactive ingredients. The company also argues that it should have three more years of market exclusivity, a request that the FDA rejected.

Watson won market approval for generic Vancocin capsules at different dosing levels for the treatment of C. difficile-associated diarrhea and an inflammation known as enterocolitis caused by Staph infections.

Vancocin accounted for more than half of ViroPharma's $544 million in sales last year. Watson said the capsule versions of the drug totaled $332 million for 12 months ending February 29.

While it's a blow for ViroPharma, the Watson approval also may hamper Optimer Pharmaceuticals (OPTR), which sells Dificid for treatment of C. difficile. (The condition causes severe diarrhea in elderly and other vulnerable hospital patients.)

Dificid was approved last year by the FDA and is Optimer's only product on the market. (See Optimer Jumps on Dificid Approval.) Even Optimer bulls have admitted that generic Vancocin likely would eat into Dificid sales. The Optimer drug already was priced almost twice as high as Vancocin -- $2,800 for a 10-day course. Convincing doctors that Dificid will be worth the price will continue to be a challenge for a company that's still stamping out a fire caused by a stock-award scandal. (See Optimer Pharmaceuticals Strips Co-Founder of Chairman Title, Fires Two Execs Over Stock Awards.)

Shares of Optimer fell more than 10% to $12.30 in midday trading Tuesday. Cubist Pharmaceuticals (CBST), which helps sell Dificid, dropped 4% to $40.31.

Twitter: @brettchase

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No positions in stocks mentioned.
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