A CV Therapeutics Sale? Premature But Not Far Fetched

Shares of CV Therapeutics Inc. (CVTX) rose by 6% in yesterday’s trading session to close at $12.78 as buyout speculation and rumors drove the stock higher. The company has reportedly hired investment bankers to investigate its strategic options. While CV Therapeutics declined comment, an Associated Press report out late Tuesday was quick to deny the rumor, citing Cowen & Co. analyst Eric Schmidt who called the speculation “premature.”

Premature… but not so far fetched. That’s because a few weeks back, May 18 to be exact, Daniel Loeb’s Third Point LLC disclosed a 9.9% stake (5.9 million shares) in the company. For those of you who aren’t familiar with Third Point, it’s a $3.5 billion dollar hedge fund with a focus on activist investing. As for Loeb, he is characterized best in a Bloomberg Markets piece written a while back (a very good read) which says that “he is known in the hedge fund world for his attacks on what he views as greedy executives who also happen to be depressing shareholder value.” The article is rather revealing and even more bluntly states that Loeb’s goal is to shame companies into replacing their CEOs, shaking up their boards - whatever it takes to boost the value of his investment, even if it means putting the company up for sale.

While there might be some criticism over his activist ways, it is hard to argue with his performance. Third Point has posted an average annual return of 29% since Loeb founded the firm in 1995. Though the prospects for CV Therapeutics have brightened recently with sales of Ranexa growing steadily and future approval of regadenoson likely, a sale of the company down the road would come at a nice premium to the current share price. If that happens, there’s little reason for longs to complain.

CVTX 1-yr chart: