1st albany: CVTX :Solvay Deal a Way to Establish a Sales Force
2004-12-08 10:30 (New York)
(CVTX - $20.76)
Buy
Current Price $20.76
52 Wk High: $22.81
52 Wk Low: $11.28
30-Day Avg Daily Vol: 845,580
Market Capitalization: $660.2M
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 reiterating our Buy rating on an
agreement under which CVT will co-promote Solvay Pharmaceuticals' Aceon ACE inhibitor in the United States, which we consider an attractive strategy to establish a sales force for the anticipated approval of Ranexa in 1H:06.
Key Points:* We are reiterating our Buy rating on an agreement under which CVT will co-promote Solvay Pharmaceuticals' Aceon ACE inhibitor in the United States, which we consider anattractive strategy to establish a sales
force for the anticipated approval of Ranexa in
1H:06.
* Aceon sales totaled $35M in the U.S. in 2003, but Solvay hopes to increase its current 2% share of ACE inhibitor sales with a supplemental NDA submission to expand the
label to low-risk cardiovascular disease patients,
an indication that has helped generate sales of $500-million plus in Europe.
* The co-promotion, which entails no up-front fees or milestone payments in either direction, will pay CVT royalties in the "50%-to-60%" range, according to the company, on sales
above a threshold roughly equivalent to current sales.
* CVT will establish a 150-person sales force for Aceon, the same size planned for Ranexa.
* Although the move will increase the loss in 2005, we conservatively estimate that an expanded label and intensified marketing will at least double sales to $75M in 2009, which would yield an estimated $22M in royalties
to CVT.
* The new 2009 estimate increases our price target to $29 from $27, based on the new estimate, a 50 P/E, and a 25% risk discount.
Valuation: Our price target is $29, based on the
estimated 2009 EPS of $1.38, a 50 P/E, and a 25% risk discount.
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