Will CVTX Get a Higher Bid?

CVT Fundamentals Look Strong, but is Management Wise to Reject Astellas' $16/Share Bid?

CV Therapeutics Inc. (CVTX), or CVT, reported financial results for the 4th quarter 2008 on February 20, 2009. Sales of Ranexa totaled $31.5 million; just below our estimate of $32.5 million. Sales increased 51% year-over-year and 4% sequentially from the 3rd quarter 2008.

Prescriptions were up nicely during the quarter and are showing solid acceleration following the revised label in November 2008. Ranexa prescriptions posted all-time highs the first week of February. New Rx trends look very impressive, up 21% in the past few months.

The company also reported $10.1 million of royalty and licenses on sales of the recently approved Lexiscan, and $0.3 million in collaboration and milestone payments, bringing total revenues to $41.9 million in total revenues. Licensing and royalty revenues consisted of $5.4 million in Lexiscan royalty, $3.1 million in amortization recognition from TPG-Axon, and $1.6 in amortization recognition from Menarini. CVT reported a net loss of $36.9 million during the quarter, or $0.60 per diluted share on a GAAP and Non-GAAP basis.

In late January 2009, Astellas made public an unsolicited $16 per share (all cash) offer to acquire CV Therapeutics. This values the total company at roughly $1.0 billion (with 62 million shares outstanding). Astellas' $16 per share bid was 41% above the prior day's close.

CVT's board, along with independent 3rd-party analysis, rejected the bid as "significantly undervalued" on February 20, 2009. Astellas responded that they continue to look at all options to move forward.

We expect that Astellas will come back with a higher bid, perhaps around $20 per share, in the next few months. At this time we advise CVT shareholders to hold onto their shares for a potentially higher offer from Astellas. However, above $20 per share we view expectations and the valuation as too high, and would recommend booking profits on the shares.

Read the full analyst report on CVTX