Why the CV Therapeutics Sell-off Was Overdone

Some CV Therapeutics (CVTX) investors could have been candidates for the company's angina treatment, Ranexa, following the company's stock plunge this past week.

The company saw its market cap cut by a quarter after the preliminary release of the MERLIN trial results. Anyone remotely following CVTX is aware of the MERLIN trial and its importance to Ranexa and the company's future.

Right now it appears Wall Street is just as mixed as the trial results. Some say pump. Some say dump.

In my opinion, the results don;t speak decisively enough to make a big trade one way or another. I do think the sell-off was an overreaction. I thought the company was a speculative buy a month ago, and I still maintain that belief. The recent slide, however, is also why I recommended buying the stock in small blocks.

Sure Ranexa did not meet the efficacy endpoint in ACS patients. However, this was not the major point weighing on this stock for the past year. It has been safety. MERLIN results did prove Ranexa to be safe. This should help the company in its case with the FDA to move Ranexa to a first line treatment for chronic angina. In hindsight, CVTX management could be criticized for takimg a shot at gaining the ACS indication, but heck, it was conducting a safety study anyway, why not try to gain an even larger patient population. CVTX did not gain nor lose anything by missing that primary endpoint.

I am interested to see how well received this data will be at the upcoming American College of Cardiology meeting later this month. After all, it will come down to the FDA and its ruling on the first line chronic angina indication and the drug's ability to work in those patients. Thus, it would appear much too early to jump ship on this one.

The company did report rising sales this past quarter, and chronic angina does offer approximately a nine million patient market in the U.S. This stands to be a lucrative market for a company sporting a $500 million market cap. I will continue watching quarterly sales numbers. If they keep climbing, so will the stock. The only other factor that may hurt this stock is overall market conditions, which deteriorated rapidly the past several days.

So, maybe CVTX investors can breathe again.

Disclosure: Author has a long position in CVTX.

CVTX 1-yr chart