There's no two ways about it -- biotech is in the doldrums. The sector has been in a funk all year, with the Nasdaq Biotech Index off almost 17% since the beginning of January. And as the saying ought to go, a receding tide moors all boats. It's times like these when I like to look at good companies that have suffered along with the lesser flotsam of the public markets and see what values await. In biotech, it's not unusual in these situations to see a company trade down 20% or more on the basis of zero relevant information. (Unless you believe the rising price of oil means drugs are less likely to work.)

Consider AmylinPharmaceuticals (NASDAQ:AMLN), off over 25% for the year. Its sin? It got its first drug approval -- the long-awaited diabetes treatment Symlin. OK, this isn't going to be the major product investors once hoped for -- that would be Exenatide, which should get an FDA thumbs-up or -down by April 30) -- but everyone realized that at the end of last year, too. Investors are taking pretty much the exact same information available three months ago, minus the uncertainty over Symlin's approval, and seeing the glass a quarter less full.

When our supposedly efficient markets get this grumpy, I like to go bargain shopping. One company that has captured my attention is CV Therapeutics (NASDAQ:CVTX). True, it's off only about 13% for the year, but it has virtues beyond the recent discount given by sour investors.

Sizing up CV
There are a lot of things to keep in mind when sizing up a biotech company. Does it have a promising product with hope of approval in a reasonable time frame? Has it given away all the upside to a partner with deep pockets, or kept a good chunk for itself? Does it have a pipeline to back the lead product? Does it have decent cash reserves? Talented management? I think CV Therapeutics pleases on all counts.

Ranexa, its flagship product, is a novel treatment for chronic angina with an approvable letter in hand. While the mainstay of angina treatment at present is beta blockers, calcium channel blockers, and nitroglycerin, Ranexa may become the first new class of anti-anginal in decades. The story behind this product is a lengthy one that I won't go into here, but suffice it to say that in May, give or take a few weeks, the company will be reporting results that, if positive, should allow for approval of Ranexa in a restricted population of angina patients -- presumably, patients whose symptoms are not sufficiently controlled by standard drugs and who have an established coronary artery disease or have suffered a heart attack in the past. A larger study, with preliminary results expected in late 2006, could open up the drug for use, both in hospitals and out, in frontline angina treatment as well as the prevention of acute coronary syndromes.

While Ranexa would probably not make a huge market impact with its initial label, the potential of this drug is substantial. Expected to cost around $1,000 a year ($3 a day) in pill form, Ranexa does not have to win a huge market share among nearly 7 million people in the U.S. with chronic angina to become a major success. And the company owns 100% of Ranexa in the U.S. and most of the rest of the world -- no royalties, no profit-sharing.

Backing this up is a drug called Regadenoson, designed for use in cardiac stress testing. Over 3 million myocardial perfusion imaging studies a year require the use of a pharmacological stress-testing agent, and choices now are limited to drugs that cause some unwanted side effects. There are two phase 3 trials under way, with results expected in the third quarter and around year-end 2005, respectively.

There are other pipeline compounds in development, too, but perhaps most interesting is a new addition -- Aceon, an angiotensin-converting enzyme (ACE) inhibitor that CV recently licensed from Solvay. Aceon hasn't been a big product in the U.S. to date -- it brought in only about $30 million last year, vs. the roughly $500 million it raked in across Europe. But a label expansion may change that. In June, the FDA is expected to decide on a supplemental new drug application that would establish Aceon's benefits in reducing the relative risk of heart attack and cardiovascular death by about 20% in low-risk patients with stable coronary disease. A further study on Aceon was halted in December because when given with a calcium channel blocker (Pfizer's Norvasc), Aceon was significantly better than a beta blocker/diuretic combination in preventing heart attack or death.

The Aceon licensing deal allows CV to collect a significant royalty (in excess of 50%) on all U.S. sales above the baseline (around $30 million) and also allows the company to ramp up a sales force in anticipation of a Ranexa launch -- a good stroke of forward planning by the management team.

CV has also been good about keeping cash around, with reserves of cash and marketable securities of over $400 million at the end of 2004. It carries convertible debt totaling almost $330 million, however, so the balance sheet is not without burden. A market cap of $716 million may not look cheap for a company currently losing money hand over fist, but this is only a fraction of the sales that Ranexa alone could potentially bring in over the next several years. If you're not feeling quite as grumpy as most investors seem to be these days, this company is worth a look.

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Fool contributor Karl Thiel does not own shares of any company mentioned in this article.