GS: Renovis, Inc. (RNVS)
Healthcare
RNVS (IL/N): FAQ on Cerovive; detailed data
on May 28
52-Week Range US$18-7
YTD Price Change 17.45%
Market Cap US$414.3mn
Fiscal Year (ending in Dec)
2004 2005E 2006E
US$-1.50 US$-1.77 US$-1.75
With the recent PIII data on Cerovive in stroke, we have summarized our view on 5
frequently asked questions (FAQ) on valuation endpoints, ongoing trials, & sales
potential. Details of the SAINT-1 study will be presented on 5/28. We expect the data to
support safety & efficacy. We continue to believe that the sales potential of Cerovive
exceeds $1B, assuming approval & launch in 2007. RNVS shares have appreciated 149%
since the release of the SAINT-1 data and up 17% YTD. The shares may be range bound
in the near term as investors evaluate the quality of the data. However, there could be
further upside to the shares if the second Phase III study (SAINT-2) is positive in late
2005/early 2006. We maintain an In-Line rating and neutral coverage view. Risks are
development failures, cost containment, reliance on corporate partners, limited
commercial experience & need for additional capital.
1. WHAT IS THE VALUATION OF RENOVIS?
Assuming FDA filing in 2006 and launch in 2007, sales of $1B in 2009, 15% net royalty
to Renovis, and a discount rate of 20%, the implied present value of Cerovive to Renovis
at 5X sales approximates $362MM in 2005 or $15/share. Together with $3 in cash and investor
optimism about indications beyond stroke, the shares have traded above $15 lately. There could be
further upside if SAINT-2 and CHANT are positive. The implied present value using different
levels of sales in 2009 and discount rates of 15% and 25% are as follows:
Table 1: Sensitivity analysis on implied present value ($/share) of Renovis Discount rate 15% 20%
25% 2009 $500 $8.8 $7.4 $6.3 Sales ($MM) $1,000 $17.5 $14.8 $12.6 $1,500 $26.3 $22.2 $18.8
$2,000 $35.1 $29.6 $25.1
Source: Company data and GS research estimates
2. WHAT WAS THE PRIMARY ENDPOINT OF THE PIVOTAL PHASE III TRIALS ON
CEROVIVE?
AstraZeneca, Renovis' development and marketing partner for Cerovive, started two Phase III trials
of Cerovive in acute ischemic stroke in May 2003. Each involves over 1,700 patients in more than
200 centers. The first study, SAINT-1, was conducted outside of the U.S., whereas the second
study, SAINT-2, is enrolling patients in the Americas. Initial data from SAINT-1 were released on
May 4 and details will be presented on May 28. Enrollment of SAINT-2 is ongoing, with results
expected late 2005/early 2006. Patients will receive a one hour loading dose of Cerovive
intravenously, followed by 71 hours of hourly infusion.
The primary endpoint of SAINT-1 and SAINT-2 is change in the Modified Rankin Scale (MRS).
Prior to the announcement of the SAINT-1 data, Renovis management indicated that the co-primary
endpoint is the National Institute of Health Stroke Scale (NIHSS). However, statistical analysis of
the NIHSS endpoint will be conducted only if the MRS endpoint is met.
For a primary endpoint to be met, a p-value of 0.05 is usually required, whereas the hurdle for
meeting a co-primary endpoint is 0.025. Based on the press release on May 4, management
disclosed that the p-value for the MRS in SAINT-1 was 0.038. Therefore, the MRS primary
endpoint was met. However, the endpoint of NIHSS was not. This led to some investor confusion
about whether the regulatory agencies would consider Cerovive to be efficacious. Renovis
management indicated that the FDA considers MRS as the sole primary endpoint and the NIHSS as
a secondary endpoint. In Europe, the regulatory agencies recommended efficacy be supported by a
second, undisclosed metric.
We believe that the nomenclature of the endpoints in SAINT-1 and SAINT-2 can be confusing.
However, with most applications on drugs with high unmet need, such as Cerovive, the FDA and
other regulatory agencies will likely consider the totality of the data on efficacy, safety and clinical
relevance. If the p-value for the NIHSS is close to 0.05 and if the statistical analysis is accepted by
the regulatory agencies, then the SAINT-1 data should be sufficient to support an efficacy claim.
We expect management to discuss the SAINT-1 data with the regulatory agencies to determine a
filing strategy.
3. HOW WILL THE SAINT-1 DATA AFFECT THE OUTCOME OF SAINT-2?
The design of the SAINT-2 study is the same as that of SAINT-1. Positive results in SAINT-1
should increase investor confidence that SAINT-2 would show favorable data, assuming the
baseline characteristics and handling of the patients are similar. However, we note that medical
practice and patients can vary among countries. We do not know the baseline data on the two trials
as yet.
The SAINT-1 data may lead to faster enrollment of patients in SAINT-2 so that data from the
second study might be available earlier than the target time (late 2005/early 2006). Management
may also decide to expand the patient number so as to increase the power of the study (a higher
likelihood of meeting the primary endpoint).
4. WHAT IS THE SIGNIFICANCE OF THE CHANT STUDY?
AstraZeneca will probably wait for the results of a Phase II/III trial (CHANT) before filing
marketing applications in the U.S. and Europe in 2006. The CHANT study was designed to evaluate
the safety of Cerovive in about 600 patients with acute hemorrhagic stroke. Enrollment started in
8/04 and should complete in H2/05, leading to results in late 2005/early 2006.
On May 4, management indicated that an independent data and safety monitoring board (DSMB)
conducted a planned safety review on the first 200 patients. The DSMB recommended that the study
proceed according to plan, which implies no major safety concerns. We believe the interim analysis
is encouraging. If the final data on 600 patients support safety of Cerovive in CHANT, then CT
scans may not have to be performed before Cerovive therapy to rule out hemorrhagic strokes, thus
reducing the time to therapy which is correlated with better outcome and earlier therapy.
Thrombolytics, such as tPA, are used in less than 5% of eligible stroke patients partly because
therapy has to be within 3 hours of symptom onset and hemorrhagic strokes need to be ruled out by
CT scanning.
5. WHAT IS THE SALES POTENTIAL OF CEROVIVE?
There are about 700,000 stroke victims in the U.S. and 800,000 in Europe per year. Current therapy
is inadequate. Assuming $3,000 per course of therapy and peak penetration of about 30% for
patients presenting within 6 hours, the sales potential of Cerovive could approach $1.5B in the U.S.
and Europe. Approximately 85% of strokes are ischemic strokes, caused by blockage of the vessels
supplying blood to brain tissues. The remaining 15%, known as hemorrhagic strokes, are caused by
rupture of blood vessels to the brain. The price of Cerovive and penetration will depend largely on
the risk benefit profile.
I, Maykin Ho, PhD, hereby |
