1st Alb: CVTX :Raising Rating on Improved Outlook and Valuation
October 28, 2004
David Webber, Managing Director 212.273.7153
CV Therapeutics, Inc. (CVTX - $ 14.75)
Rating Strong Buy Buy
Price Target $24.00 $20.00
Current Price $14.75
52 Wk High: $24.17
52 Wk Low: $11.28
30-Day Avg Daily Vol: 483,757
Market Capitalization: $469.1M
Shares Outstanding: 31.8M
Cash: $400.9M
Cash/Share: $12.61
Debt/Capital: 62.55%
Book Value: $93.16M
Book Value/Share: $2.93
Net cash / share = $4.51
Action: We are raising our rating to Strong Buy from Buy on the accelerated timeline for the ERICA trial of Ranexa, which 1)advances the projected launch to 1H:06 from 1H:07 and 2) generates a calendar of potential stock catalysts in 2005.
Key Points:
* We are raising our rating to Strong Buy from Buy on the accelerated timeline for the ERICA trial of Ranexa, which 1)advances projected launch to 1H:06 from1H:07 and 2) generates a calendar of potential stock catalysts in 2005.
* Based on an update, we believe that the stock can trade in time back toward its $30-plus range of mid-2003, when confidence in Ranexa's approvability last peaked.
* We are optimistic, because Ranexa significantly reduced the frequency of angina episodes " the primary endpoint in ERICA " in the earlier CARISA trial, ERICA is powered above 95%, and the trial is subject to a Special Protocol Assessment agreement with the FDA.
* Based on the new schedule, we have increased our Ranexa projections for the 2006-09 period and have also corrected our regadenoson model, changes that raise our 2009 EPS estimate to $1.26 from $1.07.
* We expect the stock to be driven during 1) the completion of ERICA's enrollment, 2) more details on the so-far undisclosed timeline for regadenoson, a next-generation Adenoscan now in Phase III; 3) top-line ERICA data; and 4) resubmission of the Ranexa NDA.
* Our price target rises to $24, based on estimated 2009 EPS of $1.26, a 50 P/E, and a 25% risk discount, and conservatively assumes no more than a second-line label for Ranexa and 50% switching from Adenoscan to regadenoson.
Valuation: Our price target rises to $24, based on estimated 2009 EPS of $1.26, a 50 P/E, and a 25% risk discount, and conservatively assumes no more than a second-line label for Ranexa and 50% switching from Adenoscan to regadenoson.
Discussion: We are raising our rating to Strong Buy from Buy on the accelerated timeline for the ERICA trial of Ranexa, which 1) advances the projected launch to 1H:06 from 1H:07 and 2) generates a calendar of potential stock catalysts in 2005.
CVT announced Wednesday that the ERICA (Evaluation of Ranexa In Chronic Angina) trial, which began in August, has already enrolled 372 of a target 500 patients and would complete recruitment by 1Q:05, well ahead of the previous guidance of year-end 2005, followed by the release of top-line results in 2Q/3Q:05, and resubmission of the New Drug Application in time for completion of the FDA's review in 1H:06.
Based on an update, we believe that the stock can trade in time back toward its $30-plus range of mid-2003, when confidence in Ranexa's approvability last peaked.
Despite two positive Phase III trials for Ranexa, CVT's stock price was suppressed for much of the first half of 2003 by fears that its small but statistically significant increase of the QTc interval on electrocardiograms, viewed by the FDA as a risk factor for life-threatening cardiac arrhythmias, could lead to rejection of the NDA. The stock rose in June 2003 after a favorable review of two unrelated drugs that also prolonged QT by the FDA's Cardiovascular and Renal Drugs Advisory Committee. We take the stock level achieved as a proxy for how the Street valued Ranexa's potential during the brief period before it became clear that the agency was taking a strict approach to the NDA and the stock fell again.
We are optimistic about the study, because Ranexa significantly reduced the frequency of angina episodes " the primary endpoint in ERICA " in the earlier CARISA trial, ERICA is powered above 95%, and the trial is subject to a Special Protocol Assessment agreement with the FDA.
In the 846-patient CARISA study, attack frequency was a secondary endpoint. The mean episode frequency of 4 per week in placebo-treated patients was reduced by 1.21 episodes per week (p<0.001) in Ranexa- treated patients. That metric—specifically, a comparison of the difference between baseline and on-study attack frequency for the two patient groups—is the primary endpoint in ERICA. The company screens patients for episode frequency before enrolling them in the study. The powering of the study at above 95% is unusually strong, and the company says that it must merely demonstrate a statistically significant improvement over placebo to meet the endpoint. An SPA agreement covers the study.
Based on the new schedule, we have increased our Ranexa projections for the 2006-09 period and have also corrected our regadenoson model, changes that raise our 2009 EPS estimate to $1.26 from $1.07.
We advanced Ranexa's launch in our model to mid-2006 from a previous 1Q:07, resulting in projected Ranexa sales of $23 million in 2006, $106 million in 2007, $180 in 2008, and $277 million in 2009. Basic assumptions are that the initial labeling restricts use to second-line use in the estimated 15-25% of angina patients who are resistant to calcium-channel blockers, beta-blockers, and/or long-acting nitrates, the classes of anti-anginal drug, and that CVT prices Ranexa at $3.00 per day. We have also updated our model for regadenoson, the next-generation version of Fujisawa's Adenoscan, the leading pharmacologic stress agent for cardiac flow imaging studies, to account for Fujisawa's guidance of approximately $290 million this fiscal year. Fujisawa (FJSPF.PK-$25.25-Not Rated) and CVT are developing Adenoscan jointly.
Based on assumed growth and 50% switching from Adenoscan to regadenoson by 2009, we thereby added $11 million to our royalty projection. The result was that our 2009 EPS estimate rose to $1.26.
We expect the stock to be driven during 2005 by: 1) the completion of ERICA's enrollment, 2) more details on the so-far- undisclosed timeline for regadenoson, a next-generation Adenoscan now in Phase III; 3) top-line ERICA data; and 4) resubmission of the Ranexa NDA.
Our price target of $24, based on estimated 2009 EPS of $1.26, a 50 P/E, and a 25% risk discount, assumes no more than a second- line label for Ranexa and 50% switching from Adenoscan to regadenoson.
Company Description: CV Therapeutics is developing pharmaceuticals to treat cardiovascular disease. The company's lead product, Ranexa for chronic angina, received an approvable letter from the FDA in October 2003. The company is awaiting guidance from FDA regarding further development plans.
Regadenoson (CVT-3146) is in Phase III testing as a pharmacologic stress agent for use in cardiac imaging studies. |
