CV Therapeutics Inc. Q1 2008 Earnings Call Transcript

CV Therapeutics Inc.(CVTX)

Q1 2008 Earnings Call

April 25, 2008 8:30 am ET

Executives

Louis Lange - Chairman and CEO

Dan Spiegelman - CFO

Robin Bhattacherjee - Executive Director CV Therapeutics Ltd

John Bluth - Senior Director Corporate Communications

Analysts

Bret Holley - Oppenheimer & Co

Thomas Wei - Piper Jaffrey

Michael Castor - SIO Capital

Jim Birchenough - Lehman Brothers

Alan Carr - Needham

Steve Harr - Morgan Stanley

George Zavoico - Cantor Fitzgerald

Presentation

Operator

Good morning. At this time, I would like to welcome everyone to the CV Therapeutics first quarter 2008 conference call. (Operator Instructions). Thank you. Mr. John Bluth, you may begin your conference.

John Bluth

Thank you very much. Welcome to the CV Therapeutics first quarter 2008 conference call. I'm joined today by Dr. Louis Lange, our Chairman and Chief Executive Officer, Dan Spiegelman, our Chief Financial Officer, and Robin Bhattacherjee from our European subsidiary CV Therapeutics Ltd.

Let me remind everybody that some of the following remarks may include forward-looking statements. These statements include those relating to our future product development, regulatory review and approval of our products, clinical programs, commercialization efforts and financial performance. The company's actual results may differ materially from those suggested here. I encourage you to review the cautionary statements contained under the heading risk factors in our Annual Report on Form 10-K and other documents that we have filed with the SEC for additional information concerning factors that could cause differences. We disclaim any intent or obligation to update these forward-looking statements.

Ranexa and Lexiscan have been approved in the United States by the FDA for the specified indications. Our other pipeline product candidates have not been approved by the FDA or regulatory authorities outside of the United States. CV Therapeutics pipeline product candidates have not been determined to be safe or effective in humans for any uses.

Now, I'd like to turn the call over to Louis to provide a business update. Robin will share some insight on the EMEA's positive opinion on ranolazine, and Dan will provide a financial review for the quarter. If you would like to follow along with Robin's slide, they will be visible through the webcast link on the Investor Section of cvt.com. Lou?

Louis Lange

John, thank you. Thanks all for joining the call. Obviously, we had an amazing fortnight with two products approvals and I would like to review the quarter as well. With the approval of Lexiscan by the FDA on April 10th, a non-dilutive $185 million financing transaction with TPG announced on April 15th, and a positive opinion on ranolazine from the European regulators, which we announced yesterday. We have, in just the past 15 days, reached critical milestones for the company, that opens multiple new markets and revenue streams. Substantially strengthen our balance sheet and negotiating leverage with potential partners and reinforce our confidence for the milestones that lie ahead in the coming months.

While Ranexa revenue growth moderated somewhat in the first quarter, we are pleased to see continued overall prescription of revenue growth, as we move towards potential expanded label in the next few months. Of course Lexiscan is the second new chemical entity in cardiovascular medicine we’ve gotten approved in just over two years in the States. Lexiscan is the first adenosine A2A receptor agonist, approved for use as the pharma stress agent in patients undergoing MPI studies and is a strong label that should allow our marketing partners at Astellas to capitalize on their extensive commercial experience in this market. Lexiscan was the basis for our financing transaction with TPG, which has already brought in $175 million and could bring in another $10 million this year if the commercial milestone is achieved.

With the funds from this non-dilutive financing and multiple product related revenue streams, we believe CVT now has the funds to become cash flow positive and meet the debt obligation, which is puttable in 2010, both without requiring capital market's financing or partnership dollars. We continue to aggressively pursue a partner to support Ranexa commercialization and this additional financial independence provides us important leverage for managing both the balance sheet and our discussions with potential partners.

In the wake of the positive opinion on ranolazine from European regulators we announced yesterday that with the strong approved product label in Europe, including promotable claims related to diastolic relaxation and a significant reduction in ventricular arrhythmias, we continue to see very strong interest from multiple potential partners and we expect to be in a position to have a partners selling ranolizine in Europe in the first part of 2009.

Since it takes anywhere from 6 months to 12 months to obtain pricing in most countries in Europe this represents a good launch timeline for June licensing approval. The approved labeling in Europe highlights the first in class like sodium channel effective ranolazine, and includes data from MERLIN TIMI-36 and other recently reported studies, including importantly data showing statistically and significant reduction in ventricular arrhythmias with ranolazine.

The approved labeling also notes ability of ranolazine to reduce calcium overload in the heart and to improve myocardial relaxation and decrease left ventricular diastolic stiffness this are all unique marketing claims. This product labeling clearly differentiates ranolazine from just antianginal drug, and a large market with declining rates of stents used and should allow for broad patient acceptance. In addition, the add-on indications statement was the exact statement that we sought. And we are striving to obtain it, it allows us to position the product for premium pricing in Europe.

Now I would like to ask Robin, our European head to provide some additional thoughts in the European market opportunity. Robin.

Robin Bhattacherjee

Thank you, Louis, and good morning ladies and gentlemen. Firstly as a reminder to those of you who may have joined late. The slides I'll be using are available through the webcast link on the Investor Section of cvt.com.

My name is Robin Bhattacherjee, I am the Executive Director of CVT Europe and it is my pleasure to have this opportunity to be able to give you the short-term overview of the commercial landscape in Europe. Again some of these statements will be forward-looking in nature, so please refer to our Safe Harbor statement.

The positive opinion for ranolazine adopted by the EMEA, where their centralized procedure will shortly lead to CVT being granted a single Pan-European license for ranolazine in all twenty seven member countries of the European Union.

This presentation focuses primarily on the five main European markets. The UK, Germany, France, Spain and Italy, which typically makes up approximately 85% of total European sales and it is estimated that there are 11.5 million chronic stable angina patients in these five markets alone and as such the European angina market represents an absolute potential commercial opportunity with approximately 48 million to 50 million prescriptions written annually for angina in the five big markets.

Now when you are adding the rest of Western Europe, the figure rises to well in excess of 50 million, which compares very favorably with the United States. And one of the reasons for this is that there is a stronger emphasis in Europe from the medical management to patients and there is less intervention when compared to the US. This is reflected in the intervention rates. For example the rates of PTCA in Europe, is one-third of that compared to the US.

Now looking specifically at the launch of ranolazine, we now have the outstanding safety profile that is provided from the MERLIN-TIMI 36 study, our major outcome study, which showed no adverse trends in mobility or mortality. In the current climate the value of this cannot be underestimated. What immediate benefit, is that the cautionary language will be greatly reduced relative to the current US label.

Ranolazine will be launched in Europe with a clear, well-defined label, as Lou just said, which I believe gives an ideal opportunity at maximizing the commercial potential of this product.

Firstly, Ranolazine has a unique WHO/ATC code, a first in the new class of Late Sodium Current Inhibitors. Unless the EMEA recognizes ATC codes, strong mode-of-action language is included in the label. Also, much of the positive information from MERLIN and other clinical studies, in addition to the safety data will also be included in the label, such as the positive effects on diastolic relaxation, and the antiarrhythmic properties.

And of course, the fact that ranolazine uniquely gives its antianginal effect without reducing heart-rate or blood pressure, or by ways of dilation is clearly highlighted in the label. And as a result of all of this, we will have a very well-defined label, which clearly differentiates ranolazine from other treatments.

So what base has been established to launch the product from? Well, we've been conducting successful pre-marketing activities since early 2004. Through our activities, we have an established base of key opinion leads to quote for the product across Europe and in particular, we established our own advisory faculty group. The group consists of more than 35 of Europe's most eminent cardiologists, and among other activities, we've conducted a series of high quality advisory meetings.

We've also been present at the last four European Society of Cardiology congresses, the ESC, as well as some of the major national cardiology meetings where we've had successful exhibition booths, and conducted scientific symposia on a variety of other scientific communication activities. And as a result of our activities, we have greatly increased pre-launch awareness amongst cardiologists of both CVT and ranolazine.

The Late Sodium Current is an exciting new target in CV disease, is truly established and the MERLIN study last year gave us a wonderful opportunity to build on the scientific communication of ranolazine across Europe. Incidentally, two-thirds of investigators in MERLIN were from Europe, with half of those being from Western Europe. So we have an excellent base of investigators who have experience with the product.

We have also conducted extensive market research, which has allowed us to better understand the European angina market and gain traction to potential pricing and positioning.

Turning to the label, we have a very clear indication statement that is ideal for Europe. The cast majority of angina patients who have more than one anti angina treatment and switch and add-on prescriptions make up the lion’s share of total prescription opportunities.

Furthermore, the ESC and all major European national guidelines for the managements of angina recommend beta-blockers as the first line of treatment. So, respective of the indication we would want to position ranolazine in the add-on position. And the label will also enhance the opportunity through inclusion and recommendation in the various national and regional guidelines on formularies.

And perhaps, most importantly, our label supports premium pricing. Now, we conducted extensive pricing market research across Europe, which has given us an excellent view of the pricing opportunity for ranolazine. I mentioned before our unique, WHO/ATC code and this will be an important factor to secure premium pricing. And the add-on label is also pivotal to success here. Since ranolazine pricing will now not be benchmarked, against the older first line generic classes but instead against newer entrants into the market that has secured pricing in the range of EUR 2 to EUR 3 a day. Therefore we have confidence that we will be able to secure premium pricing across Europe.

My final slide is meant to serve purely as an illustration of the market sales potential of any new product entering the big five European angina markets. You see a number of pricing scenarios and a number of possible market penetration rates, based on angina population of 11.5 million. The dollar figures in the boxes, also reflects from the wholesale and other pharmacy discounts and assumes a typical pricing compliance rate of 75% to 80%.

So, in conclusion we believe that the European angina market represents an exciting commercial opportunity and we also believe that ranolazine will be uniquely positioned in this market.

So with that, I would like to thank you for your attention ladies and gentlemen and turn the call back over to Louis. Thank you.

Louis Lange

Robin thanks. Well, I can tell you that potential partners have loved the backend work that we've done in Europe. That has helped us with regulatory approval, pricing and reimbursement and positioning Ranexa as not just another angina drug. I think with outcomes data we can go and trump nitrates and calcium blockers with the added benefits of diastolic relaxation and antiarrhythmic activities it's truly unique.

And with the momentum from our recent milestones we're looking ahead to the July 27 PDUFA day in the US, for transformation of the Ranexa label here and that's only about three months away. We know that FDA is working diligently away and so far we're pleased with the dialog. So we are continuing to work hard at growing the Ranexa business with the current restrictive label and really are very pleased with the patient's, physician's response right now.

So, we remain optimistic that the data package we submitted in US will be successful as it was in Europe. And clearly the last couple of weeks have been -- some of them were exciting in the history of CVT or maybe any biotech company. We are looking forward to the milestones we have in front of us.

Now I would like to turn the call over to Dan for our financial revenue. Dan.

Dan Spiegelman

Thank you for Lou. Earlier today we issued our first quarter financial press release. Complete details are available on that release. So I encourage you to refer to the document for further information.

Let us start with revenues. For the quarter ended March 31 2008 we recorded $22 million of net product sales of Ranexa. This represents a 5% increase over the $20.9 million of net product sales in the prior quarter and an 83% increase compared to the $12 million of net product sales in the same quarter a year ago.

The single-digit growth rate in net revenues in the first quarter, compared to the double-digit rates seen in all prior quarters was due in part we believe to a small decline in the inventory levels at wholesalers during the quarter. Specifically, wholesaler inventory declined for approximately four weeks at the beginning of the quarter to approximately three weeks by the end of the quarter. With retail inventory staying at about six weeks total inventory was at the lower end of the historical nine to 10 week range.

We also noted net revenue growth for the quarter was slightly lower than demand growth, as total prescriptions reported by IMS increased by more than 8% on a quarter-over-quarter basis. Finally, there was a modest but steady increase in demand for the 1000 milligram tablet which will generate higher revenues over time for tablets sold than the 500 milligram tablet.

Turning now to total cost and expenses: Cost and expenses were $53.1 million for the first quarter of 2008. This compares to total cost and expenses of $55.8 million for the prior quarter and $71.2 million for the same quarter in 2007. The decrease in total cost and expenses in the quarter ended March 31, 2008, compared to the prior quarter was primarily due to lower research and development costs associated with our various development programs, slightly lower Ranexa marketing and sales expenses and lower general and administrative costs, offset in part by higher personnel-related expenses.

Netting the revenues and expenses for the first quarter, we reported a net loss of $31.9 million or $0.53 per share. This compares to a net loss of $34.1 million or $0.57 per share for the prior quarter, and $55.1 million or $0.93 per share for the same quarter in 2007.

At the end of the quarter, the company had cash, cash equivalents and marketable securities and restricted cash of a $151 million compared to a $179 million at the end of the year.

Our cash utilized for the quarter was $28 million, which compares to our cash utilized for the prior quarter of $20.5 million. The increase in cash utilization in the first quarter was due primarily to the timing of certain compensation and payroll related tax payments that happened traditionally in the first quarter. This increase in cash usage, which we have previously anticipated is consistent with our prior guidance for 2008 full year cash usage of less than a $100 million.

Let me turn now to a couple of topics related to the recently completed regadenoson financing. Starting with how we will account for the transaction. The $175 million we've already received will be recorded on the balance sheet as deferred revenue, and will be amortized into the income statement as royalty revenue, over the expected life of the royalty.

With the 2019 regadenoson patent expiration and assuming roughly three-year patent term extension, the expected life of the royalty stream is into 2022. And hence the $175 million would generate a little over $3 million a quarter through that date. If the $10 million milestone is earned, it would be recognized as income in the quarter earned.

And finally, we expect the tax liability on this transaction to be driven by the alternative minimum tax and to be in $2 million range. There are any further questions on this transaction, I'd be pleased to answer them during Q&A.

So, we ended the first quarter in a very strong financial position. Sales of Ranexa continue to grow even prior to a potential label change in the third quarter. A label change, which we believe is critical to driving expanded sales growth rates. With this sales growth, and the Lexiscan approval in early April, we are solidly on track to exceed $100 million in total topline revenues for 2008, even with the current Ranexa label.

A new Ranexa label could result in increased growth for the product, though the impact on 2008 revenues is not expected to be seen until near the end of the year. Moreover, expenses not including cost of sales stayed firmly in the $50 million to $55 million range we set last year, as a result, our net loss continued to decline.

As strong as the financial picture was, as of the March 31st, Q1 quarter end reporting date, things are even better today. With the $175 million already received from TPG-Axon Capital as part of our sale of half our regadenoson royalties plus the $12 million regadenoson approval milestone we received from Astellas, we have substantially strengthened our balance sheet.

In fact, if we'd receive those funds prior to March 31st, our ending cash balance would have been $338 million. As previously noted with the funds from this non-dilutive financing, we believe CV Therapeutics now has the funds to potentially become cash flow positive and meet the dead obligation which is portable in 2010, both with our acquiring capital market financing or partnership dollars.

In addition to the balance sheet enhancements, we've added two important products approvals in the last three weeks with regadenoson approval in the US and ranolazine positive opinion in the EU. We anticipate generating royalties from regadenoson and another Astellas product in 2008 and assuming a partner in the EU, we expect to be generating royalty income from ranolazine starting in 2009.

So we end the quarter in terms of guidance for full year 2008, we continue to reaffirm the following key financial metrics. Total topline revenue in excess of our 100 million. Total operating expenses not including cost of goods in the $200 million to $220 million for the year and total cash used of less than a $100 million.

Now, we'll turn the call over to the operator for Q&A. Operator?

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Bret Holley with Oppenheimer & Co.

Bret Holley - Oppenheimer & Co

Congratulations on the approval.

Louis Lange

Thanks, Bret.

Bret Holley - Oppenheimer & Co

Hey, I just got a question about the relative timing of the partnership. It seems like to me the potential partner in Europe might want to be in place for discussion on negotiating pricing and that would suggest that sooner or later would be the time on the partnership. Can you just give me a little bit clearer view on that?

Louis Lange

Yeah, well Bret, well, the advantage we are having some the people, and we have four or five peoples in England on the ground is that we use the same agencies and consulting firms that they use and our people have been in many of the same company. So, that's not a big deal.

We have lots of interest on partnership whether it's global or EU. And I think the goal here is to maximize the outcome for the product and enhance our shareholders. So we're very confident about obtaining a partner. But I think we want to get the right deal.

Bret Holley - Oppenheimer & Co

Okay. And then, I guess along on those same lines, what is your current stance on the global versus just a European partnership given the approval yesterday?

Louis Lange

Yeah. Well, this is a multi-dimensional chess game with lots of apples, oranges and pears. And I think it's our job as the management team is to optimize the outcome and I would say it's too early to tell. It could be global, could be RW, it could be Europe. And, of course, it can come with pipeline support, development support and different flavor of commercialization support. And there are lots of opportunities today. So it will too early to pin us down yet on which one.

Bret Holley - Oppenheimer & Co

Okay. And a quick question for Dan, on the inventory side, what is your plan for managing that situation going forward? I mean. Do you have agreements, so you can control the inventory going forward for Ranexa in the U.S.?

Dan Spiegelman

We do have inventory agreements and they are operating within on the-- change from forward of three weeks as well within the contractual range. And that's just sort of the -- put life in that, [life] as being a drug company. They modulate those slightly.

Louis Lange

And Bret, I wouldn't get too excited about what's going on in day-to-day right now with sales with the restricted labels. These labels going to change dramatically for the better .So, it's going to be much more exciting going forward.

Bret Holley - Oppenheimer & Co

Okay. Thanks a lot guys. I seem glad. Congrats again.

Louis Lange

Thanks.

Operator

Your next question from the line of Thomas Wei with Piper Jaffrey.

Thomas Wei - Piper Jaffrey

Thanks very much. Hi.

Louis Lange

Hi.

Thomas Wei - Piper Jaffrey

I had wanted to ask you if you could revisit some of the Ranexa metrics in the US that you had given to us before and help us understand what the relative split is between the growths from just the number of new physicians that are giving the drug versus growth in the number of patients per physicians.

Louis Lange

Well, right now we have about 11,000 cardiologists that have written scripts which is about 50-60% of cardiology. And we have about 12,000 internist and primary care docs that have written scripts. So, they are starting to grow faster than cardiology by a factor of 3 or 4, quite a lot from referral. But some of it may be from just education overtime. We are not promoting to internist or primary care docs except by accident. Dan, other than that, do you have any other color to add beside that?

Dan Spiegelman

Yeah, we don’t have specific patient per doctor data. The number of doctors that have written ten or more scripts continue to grow and we continue to see that, but there haven't been a dramatic change really in that relationship in the marketplace.

Louis Lange

I think one success that we have had recently that we didn't break out is Part D coverage has increased substantially starting in April. And that's an important market for us. We will continue to work on both the commercial and Part D sides but we now have about 60% coverage in commercial, may be a little bit less than 50, up from 30 on the Part D side.

Thomas Wei - Piper Jaffrey

And then on the European front, can you talk about the back and forth that you had with the EMEA that led to the exclusion of the 1,000 milligram dose from the label. Was there something in the safety profile despite the MERLIN data?

Louis Lange

No. the safety profile is great, Thomas, as requested in the label. Europe takes a sort of a [PK view] of the data and if you go back to CARISA, remember that 750 in a 1,000 were pretty similar and I think it is their view, as there was not much of a back and forth. I would point out. I know you sort have been on the wagon of where you have to have a 1,000 with lower A1c. And that’s not reflective of the data. If you go back to CARISA, the higher the baseline, if you had baseline of 8.5 or 9, which is typical of the other diabetic studies, we lowered the hemoglobin A1c by 1 to 1.5.

So we have doctors in practice in the US using 500 milligram getting a point reduction in A1c. So it won't have any bearing whatsoever and, yeah, we are very pleased with the three doses that are there and it's a great strong safety label that really will trump calcium blockers or nitrates in the market place.

Thomas Wei - Piper Jaffrey

Thank you.

John Bluth

Sure.

Operator

The next question comes from the line of Michael Castor with SIO Capital.

Michael Castor - SIO Capital

Hi. Could you guys clarify the payment that you received for the regadenoson sale. The $2 million tax burden, is that the total tax payment you have to make on that?

Dan Spiegelman

That’s our estimate. Yes.

Michael Castor - SIO Capital

That’s because you used NOLs to offset them of the tax burden?

Dan Spiegelman

Yes.

Michael Castor - SIO Capital

All right. Outstanding.

Louis Lange

Yeah. I know, it is good.

Michael Castor - SIO Capital

And second question was, as you expand the label and hopefully expand sales beyond the prescribing audience now, does that imply any necessary change in the marketing spend?

Louis Lange

Well, I think at the present time we are going to continue, as Dan said, on the OpEx guidance line that we are on. But I think the whole point of having a partner is for them to expand the sales and marketing efforts significantly into internal medicine and primary care. But that won't happen until after the label change or go after a partnership.

Michael Castor - SIO Capital

All right, very good thank you.

Louis Lange

Thanks.

Operator

Your next question comes from line of Jim Birchenough with Lehman Brothers.

Jim Birchenough - Lehman Brothers

Hi guys, I joined a little late so I apologize if this has been asked, but could you just comment on the exclusivity for ranolazine in Europe just the patent protection and any period of exclusivity you have in Europe?

Louis Lange

Yeah as you probably know it is very attractive in Europe. We get 10 years of data exclusivity. So that's perfect, it is twice what you get in the US. And the patent go to 2019 and beyond, and I think the patent is also very strong. So we have excellent coverage and the protection in Europe.

Jim Birchenough - Lehman Brothers

And have you any comments on pricing, how you are thinking about that in Europe relative to the US?

Louis Lange

Yeah Robin why don't you talk just for a second about a recent benchmark of Ivabradine sort of a beta blocker equivalent that was launched recently into a very tiny part of the market.

Robin Bhattacherjee

Certainly thank Louis. Ivabradine is the new agent which was launched a couple of years ago by Servier and it is with a restrictive label and was the genuine new entrant in to the European angina market for over 10 year. Obviously the older classes in the European market are all highly [generalized] and that's cents a day, eurocents and such like. The Ivabradine came in has launched in its area of EUR 2 to EUR 3 a day, so premium plus and that certainly is the benchmark that we see now.

Jim Birchenough - Lehman Brothers

Great, thanks for taking the questions.

John Bluth

Thank you.

Operator

(Operator Instructions). Your next question comes from the line of Alan Carr with Needham.

Alan Carr - Needham

Good morning everyone.

Louis Lange

Hi

Alan Carr - Needham

Congratulations on your progress.

Louis Lange

Thanks.

Alan Carr - Needham

A couple questions, one of them related Europe and the other one financial, but in Europe, can you elaborate on which strategy is for, not to take anything from your progress of the label so far. But maybe going to first line and adding some of the other indications looking for in the US like diabetes. And the second question is, can you provide a little more detail and now that you have the extra cash here, your strategy for, and timing for bringing down that debt.

Louis Lange

Yeah well I think as we said in the call we don't want, people don't want first line drugs. Pharma would say they won't launch a first line drug in Europe because you get price against the reference compound of $0.80 a day. So what Pharma does and what we did is to go after a broad second line indication that allows us to get premium pricing. That gives you the patient volume and the pricing of the drug.

So we have exactly the indication we submitted and that we wanted and we tested in the market place. We did get the other features that are attractive, but I thought realization is completely unique. There is no drug without labeling and in terms of suppression of ventricular tachycardia, we also have a great opportunity because it the only safe antiarrhythmic now, as you probably recall amiodarone adrenaline has severe toxicity, pulmonary and thyroid. 50% of people drop off the drug in a year or two and [Atenolol] causes sudden death. So we have the only safe antiarrhythmic and it is terrific.

With respect to diabetes the MERLIN study wasn't designed with the EMEA and they obviously had to review MERLIN in a hurry and didn't really quite in fact get to the diabetes stuff. It is completely different in the US, where our diabetes data was cited by Bob Temple with the advisory panel in ‘03, we designed a study with FDA. They have been very, very interested in diabetes data all along. So, we will see how the progress goes in the States but we would be optimistic and I think we got two additional promotable claims in Europe and we are going fir two additional ones in the US. So I suspect that would be successful.

Alan Carr - Needham

Okay and then regarding the financial.

Louis Lange

Yeah well, obviously I think, as Dan and I both said, it gives us flexibility to do a variety of things, including negotiate a better partnership. We would not comment in advance of any particular use of cash.

Alan Carr - Needham

Okay. Thanks very much. Congratulations again.

Louis Lange

Thanks.

Operator

Your next question comes from Steve Harr with Morgan Stanley.

Steve Harr - Morgan Stanley

Well, I think that last question kind of got at what I was trying to get at. So I just wanted to just maybe refine a little bit. You have a second line label in Europe. Is there any read through for what we should expect in the United States in terms of your desire to remove the necessity to fail other therapies from the label as we approach that PDUFA date.

Louis Lange

Yeah, well, Europe is interesting because it is the predicate for what we will be doing in the States, and then you do not see any cautionary language in that indication, like UT, so that is completely gone, and that's what defer the approval. So obviously, in the US, we're in a positioned to get a first line label because here it has economic upside for it. So it will simply say, indicated for treatment of chronic angina. That is a first line label, and we are actually very confident.

I would also point out that we were included in the pilot safety monitoring program that the FDA had that they put out about three weeks ago or four weeks ago now, their own assessment of the first year treatment with ranolazine, and observed that there were no cases of [tarsitis] were really attributed to the drug, that they continue to believe in its safety and therefore needed to make no downgrades of the label. So that is a good health keeping seal of approval, if you will. The FDA at this point, obviously they now are revealing all the placebo controlled MERLIN data, and since that is very supportive, and we have a written FPA agreement, which I'll remind you, we did not have in Europe. We still got a great label there. We should do extremely well here in the US.

Steven Harr - Morgan Stanley

Dan, what's the -- And thanks, Lou.

Louis Lange

Sure.

Steven Harr - Morgan Stanley

Now what's the -- what do you consider the normalized inventory level that you are expect for Ranexa as we go forward? Is it just draw down? I mean the inventory draw down, first of a price increase or is there some kind of a change that you expect from the normalized inventory level.

Dan Spiegelman

You are talking about on the balance sheet?

Steven Harr - Morgan Stanley

No. I am sorry. The wholesale level.

Dan Spiegelman

I am sorry, I didn’t understand your question. Yes. I would expect it to be in the three to four week range. And it's just that it fluctuates between those bounds, it has small impacts on revenue on the quarter.

Steven Harr - Morgan Stanley

Great. Thanks.

Louis Lange

Thanks, Steve.

Operator

Your next question comes from the line of George Zavoico with Cantor.

George Zavoico - Cantor Fitzgerald

Well, hi, Dan.

Louis Lange

George, how are you doing.

George Zavoico - Cantor Fitzgerald

Thank, good, great quarter.

Dan Spiegelman

Thank you.

George Zavoico - Cantor Fitzgerald

And unusual for a biotech here to record about $187 million and added to the balance sheet in a matter about a week?

Louis Lange

Yeah, I know. Well, it was great with two product approvals too.

George Zavoico - Cantor Fitzgerald

Yeah. I have a question. You mentioned in your call regarding that you now believe you have enough on your balance sheet to go forward not -- without necessarily tapping into capital markets and partnerships. I expect in you use -- since you don’t have a sales force there, that you'd probably get a partnership there, but in the US you have, still quite a substantial sales force.

Do you have any plans in the new future, perhaps as an option or alternative strategy to increase that sales force, say in the second half, in case you don't have a US partner after the PDUFA date?

Dan Spiegelman

Well, we are looking at all possibilities. I think that the opportunity to get a European partnership is tremendous. Nobody has products ready to launch and we have a great label. We have partners all over. So, I am pretty confident that we will get one and may well be global. We will be in a vastly different position later in the year. I wouldn’t expect that we're going to change our sales forces at this point, but we have to wait and see and one of the goals would be to probably find support for our sales forces from a global partnership. So it is early, but we have lots and lots of interest and discussions George.

George Zavoico - Cantor Fitzgerald

Okay. And second question on as you mentioned MERLIN was not designed for diabetes or for antiarrhythmia, those clearly fell out of it quite favorably. Do you have any plans either by yourselves or in your partnership discussions to follow-on trials for those two indications?

Louis Lange

Well I have said that a few times, I think the one is most attractive to me right now paroxysmal atrial fibrillation with that patient or a atrial fib. We have been designing a study, we probably will meet with regulatory agencies and we could well start that study in the second half of the year. But we have not committed to that yet.

Other opportunities might be in diabetes and so forth, they are both significant opportunities. But I think AF is very similar to the [BTAC] promotable claim we got in Europe. There is no safe outpatient atrial fib drug and it is an enormous market opportunity and it is really right there for our taking, since we had two cuts of efficacy in the MERLIN study with atrial fib. They look interesting. And the basic science has already been published. We've been noted in the number of arrhythmia presentations as probably the next atrial fib drug. So that's the area that I like but we have not yet committed to pulling the trigger.

George Zavoico - Cantor Fitzgerald

I see, okay. And finally getting back to your Investor Day, you mentioned there are a couple of new drugs in the pipeline, due to expect to file any new INDs before the end of '08?

Louis Lange

Yeah we do. We have not given specific guidance on it, but we have three or four very interesting candidates as we said in February and we'll be updating the street later.

George Zavoico - Cantor Fitzgerald

All right thank you very much.

Louis Lange

George thanks.

Operator

You have a follow-up question from the line of Jim Birchenough with Lehman Brothers.

Jim Birchenough - Lehman Brothers

Hi guys. Just wondering if you can talk in broad terms about how you think about a partnership and one that allows you to maintain the top line growth while enhancing the bottom line and I guess what I am getting at is if you do a profit split you could get buried under a spend and if you do a royalty arrangement it could dilute the top line. Is there some intermediate structure that you are thinking about that can optimize the economics to you?

Louis Lange

Well look we are at a different position than companies like Onyx, they did a deal ten years as a profit split and that is a great product obviously. But we are already on the market. So certainly in the US we would be. Our strong expectation would be that a partner could sell more than we could sell by ourselves. And we would expect any deal to reflect that.

Obviously in Europe it is much more likely that we are just going to have a passive royalty or in Japan or anywhere else. But I think we are in a very, very strong position right now with the balance sheet and the drug approved in 80% of the world in terms of dollar potential to drive a great deal for us.

Jim Birchenough - Lehman Brothers

And how important is it that you continue to book the sales when you are discussing these partnerships?

Louis Lange

I think it is important, but I think there are lots of ways to look at the dollars that would come in to us as being important in other ways, so.

Jim Birchenough - Lehman Brothers

Okay, thanks Louis.

Louis Lange

Yeah thanks.

Operator

There are no further questions at this time. I will now turn the conference over to Dr. Lange for concluding remarks.

Louis Lange

Thanks. Well obviously we had an amazing couple of weeks. We now have begun serious access of four revenue streams. Obviously, ongoing US sales of Ranexa, Lexiscan is getting launched soon. The royalty from the other Astellas product and EU Ranolazine.

So we have put the company really on a sound commercial footing with a lot of upsides from revenue growth and partnering dollars. And with it the balance sheet strength that we've accessed during the last few weeks as well. We feel very good about the future in the next two years. So thanks everybody.

Operator

This concludes today's CV Therapeutics first quarter conference call. You may now disconnect.

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