Yesterday, drugmaker and Rule Breakers pick CV Therapeutics
After guiding for $280 million in operating expenses for 2007, which would have rapidly drained its remaining $267 million in cash and investments on the balance sheet, CVT was hoping for very strong results in a label-expanding study, dubbed Merlin, for angina drug Ranexa.
Unfortunately for CVT, the Merlin study failed the primary endpoint as a treatment for acute coronary syndromes (ACS). The results should still be good enough to get Ranexa indicated as a treatment for front line angina when it comes up for FDA review in the middle of 2008.
As a consequence of the reduced expectations for Ranexa sales following the drug's lack of efficacy in ACS, CVT realized something had to give and decided to cut approximately $75 million off of its expenses going forward. These cost-cutting maneuvers won't be without some detriment to CVT since it is cutting its sales force.
Considering that the sales reps that will remain were responsible for 80% of Ranexa scripts, the Ranexa marketing cutback shouldn't hurt the compound's sales growth rate too much. As CVT's management stated, another benefit to the reduced marketing spend is that getting rid of the lower-producing unprofitable sales reps should improve the margins on Ranexa significantly. Partly as a consequence of this more limited detailing of Ranexa, CVT is in discussion with potential co-marketing partners for the U.S. and the EU (which was already in the works).
With the reduced cash burn rate, CVT estimates its existing financial resources will be enough to last at least two years without the need for more dilutive financings. CVT's management was being conservative with this estimate, though, by assuming pre-Merlin prescription growth rates for Ranexa going forward even though weekly script growth has been 25% higher on average following the announcement of the Merlin results.
These cost-cutting maneuvers will put CVT on firmer financial footing sooner than expected and allow it to possibly turn cash flow positive sometime in 2009. With the pharmaceutical and biotech sectors filled with many drugmakers plodding through time on hype alone and never willing to alter failed strategies, it's nice to find ones like CVT that are willing to alter their financial strategy once the situation calls for it.
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