User:Khartand/CVTX

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3/26/07 DB Downgrade and Selloff

Today (3/26/07), Deutsche Bank analyst Jennifer Chao downgraded the stock to sell from hold and set target price of $2. The stock plunged $1.82 or 21.2% to close at $6.75. This is the second time DB downgraded the stock. The same analyst downgraded CVTX from buy to hold after company's disclosure of Ranexa "top line" or summary data from the MERLIN clinical trial data that the drug is ineffective at treating acute heart condition or heart attack. However, the same trial also shows that Ranexa is safe, which could help Ranexa to be approved as the first option to treat chronic chest pain or angina, for which the drug is approved to be used, but only as the last option.

It is interesting that this latest DB downgrade actually comes a day before the full trial data was to be presented at American College of Cardiology for its 56th Annual Scientific Session in New Orleans. Ms. Chao of DB expected that the full data will be even more negative than the market had expected. I don't have the full report, but I find this downgrade a little surprising (or suspicious?) especially that later in the day, analysts from Lehman Brother defended the stock and kept his target price at $40. So does DB knows something that others don't? How did traders follow her "outspoken" recommendation? Well, we'll find out tomorrow when the full data is presented I guess.

And oh, I do still have open position in CVTX.

--khartand 16:00, 26 March 2007 (PDT)

Followup on 3/27/07, the full presentation on Ranexa's Merlin trial is out. Well, in my opinion there was no real surprises. It was consistent with the company's earlier release. While the drug does not effectively treat acute coronary syndrome or heart attack, in long term it does reduce incidence of ischemia. More importantly, the trial shows that the drug doesn't cause heart arrhythmia due to its Qt prolongation effect, which may support the company's case to the FDA to broaden Ranexa's label to allow it to be used first line for chronic angina. While I agree with Jennifer Chao of DB that the bar for this will still be high, but the news is not as apocalyptic as she forecasted the day before. I think the short term catalyst for the stock will be if Ranexa prescription will pickup as result of the trial and in the long term FDA action to let the drug be used as earlier option for chronic angina treatment. The stock may bounce back a bit, but I think Lehman's $40 target would be hard to achieve.

--khartand 17:10, 27 March 2007 (PDT)