<The Intercardia Wildcard>
Headline: Intercardia: Reports FY4Q Results; BEST Study Is Still Key
Author: CA Butler,PhD/R.Rouse (212)526-4410
Rating: 1
Company: ITRC
Country: OPR CUS
Industry: BIOTEC
Ticker : ITRC Rank(Prev): 1-Buy Rank(Curr): 1-Buy
Price : $23 1/2 52wk Range: $27-16 Price Target: $32
Today's Date : 11/14/97
Fiscal Year : SEP
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EPS 1996 1997 1998 1999
QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr.
1st: 0.72A 0.16A 0.16A -1.71E -0.27E - -E - -E
2nd: -0.11A -0.03A -0.03A -0.29E -0.29E - -E - -E
3rd: -0.12A -0.09A -0.09A -0.31E -0.31E - -E - -E
4th: -0.29A -0.12E -1.55E 0.23E 0.23E - -E - -E
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Year:$ 0.20A $ -0.09E $ -1.51E $ -2.08E $ -0.64E $ -0.83E $ -0.83E
Street Est.: $ -0.09E $ -0.10E $ -2.33E $ -2.52E $ -0.76E $ -0.83E
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Price (As of 11/13): $23 1/2 Revenue (1997): $5.0 Mil.
Return On Equity (97): N/A Proj. 5yr EPS Grth: N/A
Shares Outstanding: 6.8 Mil. Dividend Yield: N/A
Mkt Capitalization: $160 Mil. P/E 1997; 1998 : N/M; N/M
Current Book Value: $3.93/sh Convertible: None
Debt-to-Capital: N/A Disclosure(s): C
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* Intercardia reported FY4Q EPS of ($1.55) versus ($0.13). This was larger
than the ($0.12) we had expected as a payment to partner Astra-Merck was to
have come in 1Q98 but instead was booked in this most recent period.
* We are adjusting our estimates to reflect the appropriate timing of this
payment, but await the closing of the Transcell acquisition (in early calendar
1998) for a better refinement of our model.
* The BEST study with bucindolol/Bextra continues to enroll and it will be the
early stoppage of this trial that will prove to be the predominant driver for
ITRC shares. Our 1-Buy is thus reaffirmed.
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SUMMARY -Intercardia,
Inc. reported results for its fiscal fourth quarter (ending
Sep.30) of a $1.55 per share loss versus a loss of $0.13 a year ago. The
company booked $223,000 in contract R&D revenues for the period, whereas we
had anticipated none. R&D burn for the quarter was $11.7 million and included
an $11.0 one-time payment to US marketing partner Astra Merck, though we had
anticipated the payment to come in the current quarter (FY1Q98). This now
allows Intercardia to receive from Astra Merck a 15% royalty on bucindolol
sales up to $113 million and a 30% royalty for all sales above that level.
Without the payment, net R&D' of roughly $721,000 was less than the $825,000
in our model. Partially offsetting this, G&A spending of $529,000 was
slightly more than $596,000 we had forecast. After net interest/investment
income and minority interest, the resulting net loss of $10.5 million compared
to a nearly $1.0 million projected loss. The one-time payment not
withstanding, the quarter would have been slightly ahead of our expectations
as a result of the nominal collaborative income. Intercardia ended the period
with cash and marketable securities in excess of $37.0 million ,or $5.47 per
share. This level is almost identical to that of a year ago.
We are adjusting our estimates to reflect the timing of the Astra Merck
payment, thus with the associated loss recorded in this period our FY1998
estimate improves from ($2.08) to ($0.64). Recall that Intercardia recently
announced the $18 million acquisition of Transcell. We anticipate the deal
(which is subject to shareholder approval) to close in the first calendar
quarter of 1998 and we will revisit our estimate at that time as it relates
to, among other things, the increased sharebase and the impact on R&D burn.
CONCLUSION -The
overriding factor that will influence the stock in the near-term is the
outcome of the pivotal BEST study utilizing bucindolol, now known as Bextra,
in the setting of congestive heart failure. Enrollment has now surpassed the
2,000 mark (2,048 to be exact) and we continue to anticipate the premature
halting of the study due to efficacy of the drug. With this event on the
horizon, the progression of the once/daily bucindolol program, and the value-added
to be afforded via the Transcell transaction, we believe the
fundamentals at Intercardia to be improving and thus reassert our 1-Buy
rating.
BUSINESS DESCRIPTION: Intercardia is a biotechnology company with a focus in
cardiovascular and pulmonary diseases. ITRC's strategy is to in-license
products and then contract out the further development of such products.
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Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the
past three years a public offering of securities for this company. B-An
employee of Lehman Brothers Inc. is a director of this company. C-Lehman
Brothers Inc. makes a market in the securities of this company. G-The Lehman
Brothers analyst who covers this company also has position in its securities. |
