CVTX :Downgrading To MP—Month Two Growth Falls Short
2006-06-15 02:21 (New York)
Piper Jaffray & Co.
Company Note
(CVTX - $14.03)
Market Perform Volatility: Medium
Downgrading To MP—Month Two Growth Falls Short
Thomas Wei, Senior Research Analyst Reason for Report:
212 284-9305, thomas.a.wei@pjc.com
Change in Recommendation
Gur A. Roshwalb, M.D., Research
Analyst
212-284-9314, gur.a.roshwalb@pjc.com
KEY POINTS:
* May Rx Falls Short Of Our Expectations. As we noted in our recent analysis
of 269 historical drug launches (see note dated 5/15/2006), Ranexa would
have needed to match the growth in the top 25% of product launches after a
first slow month to meet our estimates and Street consensus in the $26-
$27m range. Of particular note, most of the slow starting drugs
experienced substantial acceleration in month two, with median growth of
292% from month one to month two. Growth in May Ranexa Rx based on the IMS
monthly data fell short of this benchmark (+149% over April).
Specifically, the IMS monthly audit for May captured 3,022 Ranexa Rx for
the second full month of launch, up from 1,216 in April. This represents
growth of approximately 100-125 Rx per week on average through May. Our
previous estimates assumed that June prescriptions would accelerate to
more than 5,300 Rx, implying growth of 230 additional Rx each week. Recent
IMS data for June do not appear to be on this trajectory.
* Ranexa Slower Than The Average Cardiology Drug Launch. We had also
analyzed the 44 cardiology drug launches in our previous note and found
that cardiology drug launches were generally slower than non-cardiology
launches. At the time, the first month of Ranexa sales as a % of our
projected year-end prescription run rate was in line with the average
cardiology drug launch. However, the growth in Ranexa Rx in month two
(+149%) puts Ranexa below the trajectory of the average historical
cardiology drug launch (+236%) as well.
* Downgrading To Market Perform And Lowering PT To $13. We are moving to the
sidelines until we see whether the company's peer-to-peer marketing
initiatives being rolled out this month are effective in accelerating
prescriptions. We are lowering our Ranexa sales from $26m to $21m in 2006
and from $94m to $86m in 2007. As a result of our reduced estimates, our
12-month price target moves from $20 (35x 2010 EPS, discounted at 30%) to
$13 (35x 2010 EPS, discounted at 30%).
From To Price: $14.03
Changes (Previous) (Current)
52 Week High: $29.79
Rating Outperform MarketPerform
52 Week Low: $13.48
Price Tgt $20.00 $13.00
Price Target: $13.00
FY06E Rev $43.9 $38.9 (35x 2010E EPS, disc. 30%)(mil)
Shares Out (mil): 45.4
FY07E Rev $109.1 $101.2
Market Cap. (mil): $637.0
(mil)
Avg Daily Vol (000): 1,590
FY06E EPS ($5.83) ($5.93)
Book Value/Share: $0.08
FY07E EPS ($3.71) ($3.86)
Cash Per Share: $8.22
Debt to Total Capital: NM
Est LT EPS Growth: NM
P/E to LT EPS Growth (FY06): NA
Est Next Rep Date: 08/01/2006
Fiscal Year End: Dec
Rev (mil) 2005A 2006E 2007E EPS 2005A 2006E 2007E
Mar $5.6A $5.1A NA Mar ($1.31)A ($1.49)A NA
Jun $5.8A $5.1E NA Jun ($1.43)A ($1.63)E NA
Sep $4.1A $15.5E NA Sep ($1.26)A ($1.39)E NA
Dec $3.4A $13.3E NA Dec ($1.65)A ($1.43)E NA
FY $19.0A $38.9E $101.2E FY ($5.66)A ($5.93)E ($3.86)E
CY $19.0A $38.9E $101.2E CY ($5.66)A ($5.93)E ($3.86)E
FY RM 33.5x 16.4x 6.3x FY P/E NM NM NM
CY RM 33.5x 16.4x 6.3x CY P/E NM NM NM
INVESTMENT RECOMMENDATION:
We are moving to the sidelines until we see significant acceleration in
Ranexa Rx.
RISKS TO ACHIEVEMENT OF TARGET PRICE:
Risks include: 1) failure to achieve Ranexa sales estimates and 2) clinical
risk in Ranexa label expansion.
COMPANY DESCRIPTION:
CV Therapeutics, Inc. is a leading cardiology company. |
