CVTX has excellent management and continues to be one of my top biotech picks. The recent announcements highlight the potential.

1. Better late than never. The FDA finally approved Ranexa for first line anti anginal use. The approval was actually three for one. CVTX had three submissions and it appears all three were approved. That is an excellent result which should help accelerate Ranexa sales.
2. Q3 results show continued strength in the adoption of Ranexa, with sequential 19% growth.

The two dollar question remains the same. Will CVTX manage to become a profitable company and if so, when?
The loss is narrowing and Ranexa revenues continue to show strong growth. Simplistically, if Ranexa sales grow 15% sequentially, they should hit profitability around Q3 2009. They achieved 19% this quarter and over the last eight quarters have averaged 18% sequential growth in Ranexa sales. With the label expansion and European sales which received approval in August 15% sequential growth should be attainable.

* Q2 2008 Earnings have been adjusted to deduct $22M in milestone payments. Figures are in thousands.

What about dilution?
CVTX have enough cash to get them to profitability, “at September 30, 2008, the Company had cash, cash equivalents and marketable securities of $301.9 million”

Anything in the Pipe?
Karl Thiel, from TMF Rule Breakers, follows CVTX. He recently commented, “CV has enriched its early-stage portfolio considerably over the past several years, and it has several molecules that could be contenders in major markets, including atherosclerosis, coronary artery disease, and metabolic syndrome.”

What’s the upside?
CVTX believes Ranexa could be a blockbuster in Europe, eventually topping $1 billion in sales. CVTX will receive “significant double-digit” royalties from their deal with the Menarini Group. This Italian company paid $70 million up front for European Ranexa rights, the deal includes a potential $315 million in commercialisation and development milestones. CVTX retain all rights to the large US angina market.

History
Ranexa launched 24 March 2006 patent expiration May 2019

Also of Note
Short interest has remained high on CVTX, with 22.5% of the float short. A potential for a short squeeze exits. It is also worth noting that there has been heavy trading of the December $12.5 Calls since the FDA announcement.

Older Posts
October 2008 – Analysis Part 1

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