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CV Therapeutics Banks $175M in Royalties Deal for Lexiscan
(BioWorld Today Via Thomson Dialog NewsEdge) Shares of CV Therapeutics Inc. rose 17.6 percent Wednesday on news that the firm received $175 million in cash from New York-based investment firm TPG-Axon Capital in exchange for rights to 50 percent of royalties on North American sales of Lexiscan (regadenoson) injection.
The Palo Alto, Calif.-based firm could bank an additional $10 million "commercial-related" milestone, which could be triggered within the next 12 months, said Daniel K. Spiegelman, CVT's chief financial officer.
Shares of CVT (NASDAQ:CVTX) gained $1.31, to close at $8.76.
Lexiscan gained FDA approval April 10 for use as a stress agent in radionuclide myocardial perfusion imaging in patients unable to undergo adequate exercise stress.
CVT expects to submit a marketing authorization application for the product to the European Medicines Agency by the end of the year.
Lexiscan's U.S. approval will garner CVT a $12 million milestone payment from its partner Deerfield, Ill.-based Astellas Pharma US Inc., which is marketing the drug in North America under a 2000 deal.
The company expects to receive that milestone this quarter, Spiegelman told BioWorld Today.
CVT, which has retained the rights for Lexiscan outside the U.S., Canada and Mexico in addition to the other half of the rights in North America, already received a $7 million milestone when Astellas submitted its approval application to the FDA for Lexiscan, which targets the A2A adenosine receptor, the receptor subtype responsible for coronary vasodilation.
Astellas also has covered 75 percent of the development costs of the drug, Spiegelman noted.
In addition, the California biotech could receive royalties on another Astellas product under the firms' partnership agreement.
Between the expense reimbursements and the milestones, Spiegelman said, Astellas has fully funded the program. The $175 million cash, $10 million milestone and the royalties CVT expects to receive on Lexiscan is going to be "upside" for the firm, he declared.
"It didn't cost us any out of pocket to get that," he added.
The nondilutive financing from the TPG-Axon deal has put CVT in a position to continue to support commercialization of its chronic angina drug Ranexa and to effectively negotiate with potential partners for the drug in the U.S. and Europe, Spiegelman said.
In addition, he said, the funds will allow the firm to pay off its debts in 2010 without having to return to the equity markets to seek financing.
The magnitude of the TPG-Axon deal, said analyst Joseph Schwartz, of Leerink Swann LLC Research, "is much bigger than we would expect, since physicians we have queried seem relatively uninterested in a novel cardiac stress agent." Arguments can be made that Lexiscan has some convenience, safety and tolerability benefits over Astellas' Adenoscan (adenosine injection), the standard-of-care drug, he said in a research note.
But, Schwartz noted, physicians generally don't view the safety, convenience or tolerability issues with Adenoscan as serious. In addition, he said, that drug goes off patent soon and "should become very cheap in a few years."
Analyst Eric Schmidt, of Cowen & Co., said he viewed the transaction with TPG-Axon as a "modest positive" for CVT.
The implied $350 million value of CVT's U.S. royalty stream is "higher than we expected," he said in a research note.
In addition to the Lexiscan approval last week and the royalty deal this week, Spiegelman said, "we have other big milestones in front of us and in the very near term," which he said includes the potential approval of Ranexa in Europe and the expansion of the drug's U.S. label.
Ranexa is indicated for the treatment of chronic angina. Because the drug prolongs the QT interval, the current labeling advises to reserve it for patients who have not achieved an adequate response with other antianginal drugs.
CVT is seeking to have the labeling changed for use of Ranexa as a first-line treatment for chronic angina, Spiegelman noted.
The FDA has set a Prescription Drug User Fee Act action date of July 27 on that indication.
Analyst David Webber, of Broadpoint Capital Inc., said he expects CVT's stock to respond positively to the anticipated approval of Ranexa for the front-line angina indication.
Key risk factors for CVT, he said in a research note, include the chances that Ranexa sales growth could disappoint expectations, that switching from Adenoscan to Lexiscan could be less than expected, and that the safety profile of the study submitted for the new indication, known as MERLIN, could be interpreted by the FDA as inadequate for a label upgrade. n
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