CV Therapeutics Inc: No Real Change to the Thesis MORGAN STANLE
2007-04-24 19:07 (New York)
NORTH AMERICA
April 24, 2007
(CVTX.O) CV Therapeutics Inc
CV Therapeutics Inc: No Real Change to the Thesis
Steven Harr, M.D. +1 (1)212 761 3805 Morgan Stanley & Co. Incorporated
Conclusion: Higher than expected 1Q Ranexa sales and decreased operating
expenses were a step in the right direction, and the operating expense cuts are
consistent with our expectations that cuts to the infrastructure are inevitable
given current business trends and the cash burn (our model was aggressive in
2008 and beyond). The full impact of the MERLIN data will likely take over a
year to emerge (the JAMA editorial highlights our view that Ranexa is a good
drug for patients with symptoms after trying 1-2 other therapies), and we still
believe that safety with a lack of outcomes effect should be enough to win a
broader label and use, but not enough to drive meaningful profits.
What's New: Ranexa sales of $12M were greater than our $9M estimate, and lower
operating expenses drove loss per share of ($0.93) versus both our ($1.14) and
the ($1.03) consensus estimate. Separately, MERLIN data were published in JAMA.
Expense guidance of $275-$285M is under review, and given our view that expense
cuts are inevitable, we are accelerating some of these into 2007, which combined
with a modest increase in 2007E Ranexa sales, lowers our 2007E loss (but no
changes in out years).
Implications: Although the initial reaction to today's financial results will
likely be a modest positive, we continue to see significant risk to this company
given its: 1) high burn rate, 2) leveraged balance sheet, and 3) need to raise
significant capital going forward. A Ranexa partnership may provide the company
with a financial reprieve (and lead to broader strategic discussions), but this
business remains under tremendous pressure and we see little reason to own the
stock at these levels.
Stock Rating: Underweight-V
Industry View: In-Line
ModelWare EPS actual: (Dec 2005) USD (5.66); (Dec 2006) USD (5.49)
ModelWare EPS estimate: (Dec 2007) USD (3.02); (Dec 2008) USD (1.73)
Consensus EPS actual: (Dec 2005) USD (5.66); (Dec 2006) USD (5.57)
Consensus EPS estimate: (Dec 2007) USD (3.32); (Dec 2008) USD (1.74)
Share Price: USD 7.89 (Apr 24, 2007)
Target Price: NA
Market Cap: (mm) USD 453
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