Moderate Stance on Biotech CVTX

Several big regulatory decisions are expected for CV Therapeutics Inc (CVTX) in 2008. The U.S. Food and Drug Administration is set to rule on three separate applications for expanding the company's Ranexa label in July. The first-line angina sNDA and the anti-arrhythmic claim look solid in our view, though we are cautious on the full NDA in diabetics. Our call is that investors should Hold onto the shares at this level as fundamentals are improving.

Despite growing Ranexa sales, CVT will need approval for the first-line indication to reach profitability perhaps in 2010. The approval of Ranexa in Europe is also a key positive event to watch in June 2008. Longer-term, however, we continue to see little overall movement in the shares until investors can get a better handle on the total peak sales potential for Ranexa worldwide.

Right now Ranexa looks like a $200-250 million drug. A favorable FDA ruling in July may work to double that potential, and as a result could potentially double CVT's stock. The stock looks well supported at these levels and 2008 could be a pivotal year for management. CVT could easily head to $20 if things come together.

The Street is pretty split on CVT right now. We are in the moderately positive camp, believing that Ranexa will eventually pick up steam after the label expansion(s). We continue to see $12 as fair value right now. Approval for a first-line indication, along with an anti-arrhythmic benefit, would cause us to increase some of our long-term projections for the drug, as well as lower our risk (discount) rate in our valuation model.

Read the full analyst report on CVTX