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My name is James Hartje, President & Founder of Stocks on Wall Street, an investment advisory company providing readers across the globe investment advice, stock picks, and market updates across our various online publications. Our main website is www.StocksonWallStreet.com You can follow... More
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  • Cytokinetics (CYTK): Bullish Pharmaceutical Play 0 comments
    Jan 11, 2010 2:49 AM | about stocks: CYTK

    Hey guys so this is my second attempt at posting with a fractured wrist. Pretty difficult I must say but I’m struggling through. I go to the doctor today for the final read and after that should know the full details of my recovery. As a result, I am cutting my posting down to three times a week, Monday, Wednesday, and Friday. Since everything takes so much longer especially typing with one hand I need to allocate more times to both the site and my studies. Luckily recovery time is usually only six weeks so soon enough the site should be back at full-strength. Moving on I have been following the markets extensively and have come up on a risky pharmaceutical play I like. Here it is:

    Cytokinetics (NASDAQ:CYTK)

    CYTK is a biopharmaceutical company focused on the discovery and development of small molecule therapeutics that modulate muscle function for the potential treatment of serious diseases and medical conditions. The Company’s research and development programs are extensive and if completed will be quite revolutionary for the world of medicine. Click on this link to read further into all the details about the different clinical trials. CYTK is a very effectively run company. Just check out these numbers.

    Profitability

    Profit Margin (ttm):31.34%

    Operating Margin (ttm):32.65%

    Management Effectiveness

    Return on Assets (ttm):14.58%

    Return on Equity (ttm):30.91%

    PEG Ratio (5 yr expected):0.53

    Price/Sales (ttm):2.27

    Price/Book (mrq):1.69

    All these numbers are outstanding in my opinion. Moving on I expect CYTK to only improve its efficiency by cutting wasted expenditures and improving revenue numbers. Read the following report from J.P. Morgan:

    “Our $8 target price on CYTK is based on discounted probability-weighted sum-of-the parts analysis. The major sources of cash flows for CYTK are (1) its CK-452 drug for heart failure, (2) CK-357 for skeletal muscle related indications, and (3) marketable cash and securities. We value CK-452 at $5.57 per share and CK-357 at $1.49 per share, and cash and marketable securities at $1.42 which sums to approximately $8. For CK-452, we separately value the IV formulation, which will be used in the acute hospital setting, and the oral formulation which will be used in the outpatient setting. Our calculations are based on a 36% probability of success on the Phase II IV formulation trial for CK-452, and 33% for the oral formulation. We use a cost of equity (discount rate) of 10.6%.”

    Final Say

    I love this company for the main reason it has a huge potential upside. Mainly I have a positive view on CYTK’s pipeline of opportunities. The areas of medicine in which they are pursuing are in large areas of unmet need. This means that if these ventures are successful this stock will soar. Right now the market cap is roughly $200 million. If one of the three projects proves successful expect this company to soar to around $700 million. If all prove well we are talking about the billions. My 12-month target price for CYTK is $6.50 based on its current value, efficient operations, and growing potential.

    (Bear with me posts will get better as I get more accustomed to typing one-handed) 

    stocksonwallstreet.net/2010/01/10/cytoki...


    Disclosure: Long CYTK
    Themes: Pharmaceuticals Stocks: CYTK
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