CV Therapeutics Soars on TPG-Axon Financing (CVTX)

CV Therapeutics, Inc. (NASDAQ: CVTX) has secured a deal with TPG-Axon Capital, where it will receive up to $185 million in exchange for the rights to 50% of CV Therapeutics’ royalty on North American sales of Lexiscan injection. As part of the deal, CV Therapeutics received $175 million on closing of the transaction and is eligible to receive a potential future milestone payment of $10 million.

TPG-Axon Capital is a private equity and public equity investment firm that was spun out of buyout firm Texas Pacific Group, and it is led by the former head of Goldman Sachs’ Principal Strategies Department, Dinakar Singh.  Just on April 10, The FDA approved Lexiscan injection for use as a pharmacologic stress agent in radionuclide myocardial perfusion imaging in patients unable to undergo adequate exercise stress.

"CV" will retain the other 50% of royalty revenue rights from North American product sales and also may receive a royalty on another collaborations with Astellas Pharma US, Inc.  The company is also calling this "non-dilutive financing" and noted that it has multiple product-related revenue streams. 

It also now has the funds to become cash flow positive and meet its putable debt obligation coming in 2010 without additional financing.  It is also pursuing a partner to help commercialize Ranexa and it noted this gives it more independence to be in a position of strength in negotiations.  CV Therapeutics owns the rights for regadenoson outside of North America and expects to submit a marketing application to the European Medicines Agency by the end of this year.

This will likely cause some reduced revenue projections ahead as the company is signing away half of the North American rights.  According to First Call, its revenue estimates for 2008 are $almost $143 million and 2009 revenues are expected to be almost $217 million.  The company had about $179 million in cash and short term securities as of December 31, 2007, but its long-term debt is also listed as $399.5 million.

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Shares of CVTX closed down almost 4% at $7.45 today, but shares rose 19% to $8.90 in after-hours on this news.  The 52-week trading range is $5.41 to $13.74 and the market cap prior to the pop was listed as $452 million.

Jon C. Ogg
April 15, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at [email protected] and he does not own securities in the companies he covers.