Good digging JEB. Here is something copied and pasted from CVT thread (Biogen has in-licensed CVT-124 from CVT). Note the expected $250MM product revenue expectation from this particular analyst (1st time I've seen anyone take a stab at this number).
IIonline"CV Therapeutics: A Cheap
Biotech with Hoards of Cash
Analyst: Bob Hirschfeld
Here's a stock that has the potential to double and yet has limited
downside risk. Sounds good, right? Read on.
New drugs to treat heart disease that are going through clinical
trials may soon become a prescription for profits at CV
Therapeutics (NASDAQ: CVTX).
The biotech company is developing out-of-the-mainstream
treatments for cardiovascular disease, and has two products in late
stage and pivotal clinical trials.
By the second half of the year, CV Therapeutics will release data
on the effectiveness of the first Phase III trial of Ranolazine, its
lead product. In the second quarter, CV Therapeutics' number two
product, CVT-124 (Adentri), is slated to finish its Phase II trial.
Positive results from either trial -- which we fully expect -- will
likely lead to a significant upward move in share price.
Even if our prognosis is off, our confidence in CV Therapeutics'
shares is buttressed by the company's balance sheet, where $45
million -- fully two-thirds of CV's current market cap of $68
million -- is safely tucked away.
The Products
CV Therapeutics is actually testing three products, all of which
address cardiovascular problems. Ranolazine targets angina, or
chest pain, which is caused by an inadequate supply of blood to the
heart. CVT-124 treats congestive heart failure-type edema, a
build-up of blood. A third compound, CVT-510, is under
development for treating atrial arrthymias, the irregular beating of
the heart.
Ranolazine has been in human clinical trials since the early 1990s.
The results have repeatedly shown effective improvement in
patient exercise without adverse effects on either heart rate or
blood pressure. Angina is inadequately treated in about one-third
of cases for patients who cannot tolerate further reduction in
heartbeat. For those cases, Ranolazine makes the heart more
energy-efficient by helping it shift to glucose metabolism from fatty
acid metabolism. As the heart grows more efficient, its demand for
oxygen diminishes and angina pain is eased.
Ranolazine, importantly, is 100% proprietary to CV Therapeutics,
which assuming successful trial results, means that the company
will garner higher royalty rates than if the treatment had been
co-licensed.
CV's second compound, CVT-124, is licensed to Biogen
(NASDAQ: BGEN), in a deal that brings CV a milestone payment
of $16 million and future royalties. CVT-124, is an adenosine A1
blocker that targets cases of congestive heart failure (CHF), in
which the weakness of heart muscle causes edema, a build-up of
blood. CHF afflicts about 4.9 million Americans.
The company's third product, CVT-510 is currently in Phase I
clinical trials. It is a selective adenosine which may treat atrial
arrhythmias, a condition involved in about 1.9 million hospital
diagnoses each year. Current therapies either act quickly, but
depress blood pressure and/or heart function, or act too slowly.
CVT-510 selectively stimulates the receptor that slows heart rate
while not stimulating the receptor that lowers blood pressure, an
effect that appears to provide immediate intervention for
arrhythmia without the unwanted side effects.
The market for cardiovascular drugs is enormous, estimated at
over $11 billion annually and growing. What's more, there have
been few recent advances in treating either angina or congestive
heart failure. Current treatments, such as beta blockers and calcium
channel blockers work by slowing the heart rate, but are
ineffective for many patients suffering from congestive heart
failure and weakened hearts. One-third of the 7.2 million U.S.
angina sufferers cannot be helped by those approaches. That
constitutes a big opportunity for Ranolazine.
Similarly, conventional therapies for treating edema may be
ineffective because of the use of diuretics, which often provoke
resistance in patients, and result in potassium loss. CV-124 fights
resistance while slowing the progression of congestive heart
failure and effectively promoting excretion without causing such
side effects as renal failure, diuretic resistance, or potassium loss.
Plenty of Cash
In addition to CV Therapeutics' well-targeted line-up of
cardiovascular drugs, the company boasts $45 million in cash and
relatively low quarterly outlays of about $4 million.
But the company's trial news will be uppermost this year. Franklin
Berger, a noted analyst at J.P. Morgan predicts that 1999 will be
"the year of the clinic," with "significant trial news flow from three
development programs."
Further out, we look for increased cash flow from CV
Therapeutics' product sales. Though investors should note that
clinical risks will be followed by the very real risk of lack of
commercial success. Still, we expect that the Ranolazine trial will
be successful, which will be followed by a Food and Drug
Administration New Drug Application in the second half of 2000,
and a commercial launch in 2001. We expect a commercial launch
for CVT-124 in 2002.
The market potential for Ranolazine is the underserved two million
patients. Assuming a 20% penetration rate in 2003, Ranozaline
revenue could reach $150 million, leading to $37.5 million (25%
level) in royalties to CV Therapeutics. Given CVT-124's unique
features, the treatment could garner a 70% share of market by
2003, which would yield product revenue of $250 million and
royalty revenue of $30 million.
We also assume an increase in shares outstanding to 16 million
from 11 million, plus selling, general and administrative costs, and
research and development expense levels to be commensurate with
revenue. That brings the company's earnings to about $2.65 per
share. However, those earnings will likely be untaxed, given the
company's significant net operating losses.
Bottom Line:
Add a price to earnings multiple of 30 times and a discount factor
of 35%, and you get a 1999 price target of $14 per share. That's a
potential appreciation of 150% over the current price of about $6
per share, which is not too shabby. " |
