GS: RNVS (IL/N): Pfizer collaboration on pain is
positive but focus will remain on Cerovive.
52-Week Range US$19-7
YTD Price Change -8.21%
Market Cap US$323.8mn
Fiscal Year (ending in Dec)
2004 2005E 2006E
US$-1.50 US$-1.77 US$-1.73
RNVS and PFE agreed to collaborate globally on the development and commercialization
of small molecule antagonists of the vanilloid receptor (VR1) as potential therapies for
pain and urinary incontinence. The transaction is a positive development for RNVS, as it
validates the company?s VR1 program and provides cash flow. However, newsflow and
investor sentiment around Cerovive (stroke, Phase III) will continue to drive share price
movements near term. RNVS shares were weak yesterday, partly due to confusion about
the trial design and data on SAINT-1, which were partially presented on 5/28. If the 2nd
PIII study, SAINT-2 (expected late 2005 / early 2006), duplicates the results of SAINT-1,
the data should be sufficient to support an FDA application. We continue to believe that
the sales potential of Cerovive exceeds $1B, assuming approval & launch in 2007.
We maintain our In-Line rating and Neutral coverage view. Risks are development
failures, cost containment, reliance on corporate partners, limited commercial experience
& need for additional capital.
VR1, an ion channel protein, plays a role in nerve cell signaling in certain pain pathways.
The two companies will combine their VR1 R&D programs into a joint program to be funded by
PFE. PFE will have exclusive worldwide rights to any commercialized products. Under the
agreement, RNVS will be entitled to the following payments from Pfizer: 1) a $10MM license fee;
2) research funding of at least $7MM over the first two years of the agreement; 3) potentially an
additional 2 years of funding should Pfizer elect to extend the agreement. 4) potential milestones
(R&D, regulatory & commercial) in excess of $170MM; 5) royalties on net sales of any marketed
products that result from the collaboration. Our revised model amortizes the $10MM license fee and
$7MM in research funding over the two years beginning Q3/05 when we assume the transaction to
close. We have also increased our forecasts for R&D spending over this period. Our revised per
share loss estimates for 2005-07 are $1.77, $1.73 and $2.51, respectively.
I, Maykin Ho, PhD, hereby certify |
