citi: CV THERAPEUTICS (CVTX)-HOLD/SPECULATIVE (2S)
As in previous quarters, the focus for Q4 will be Ranexa sales, the company's
drug for the treatment of chronic angina. Overall prescription trends based on
IMS Health data continue to disappoint. As a reminder, weekly scrip data for
Ranexa first appeared in the IMS database the week ending March 17th.
Our Ranexa sales estimate in Q4 stands at $5.2 million versus the street
consensus estimate of $7.4 million, bringing our full year 2006 Ranexa sales to
$14.6 million. Based on IMS weekly scrips Ranexa is tracking roughly in-line
with our estimate, on pace for $5.5 million in Q4. As a reminder, Ranexa Q3
sales were $8.2 million, however $5.0 million came from initial inventory
stocking back in Q1.
We estimate total revenue of $10.2 million for Q4 versus the street consensus
estimate of $11.5 million. Based on our estimate, revenue for 2006 would reach
$34.3 million. We project Q4 EPS of ($1.15) versus the consensus estimate of
($1.23), with full year 2006 EPS ($5.54).
MERLIN DATA IN EARLY 2007 IS THE NEXT MOST MEANINGFUL CATALYST
Data from the MERLIN study, expected to be released in March 2007 remains the
key catalyst for CV Therapeutics. The study involves 6,500 patients and
studies the activity of Ranexa in acute coronary syndromes (ACS). We believe
the stock could trade up ahead of the release of this data given the
risk/reward at current levels. If Ranexa were to meet the primary clinical
endpoint this could boost sales to the $500 million to $1 billion range.
However, given the difficulty in predicting the outcome of MERLIN we expect the
stock will remain in the $12-$15 range until the outcome is known.
As a reminder, the primary endpoint is time to first occurrence of any element
of the composite endpoint of cardiovascular death, myocardial infarction or
recurrent ischemia in patients with non-ST elevation ACS receiving standard
therapy. It is worth noting that even if the primary endpoint is not met, the
safety profile could support the approval of the drug in first-line chronic
angina therapy. However, we remain skeptical that physicians would opt to use
Ranexa in early disease setting ahead of beta blockers, statins or ACE
inhibitors, drugs that have shown a survival benefit.
In our view, based on the fact that the study needed to be increased and
timeline for the original accrual of events was delayed suggests that patients
in this study are very well controlled. Thus, we believe that the bar is too
high for Ranexa to achieve a survival benefit over the comparator arm. More
so, since Ranexa is only a weak anti-anginal agent as shown by results from the
ERICA study in poorly controlled patients, the hurdles for achieving success
might also be too high on the myocardial infarction endpoint.
However, investor expectations are low heading into the release of the MERLIN
trial results. We believe that Ranexa will likely meet several of the pre-set
secondary endpoints, but do not expect that the drug will meet the composite
efficacy endpoint. |
