Of all the stocks in the universe of cardiac healthcare stocks, my favorite is CVTX.

This company and its stock have had a rocky course over the past severals years. Their lead drug Ranexa- which was developed to treat chest pain- required multiple reviews by the FDA before finally being approved a little more than a year ago. The drug was approved only for second line use and with warnings about QT prolongation ( a change detectable on EKG which is associated with a possible risk for sudden death). In addition the FDA refused to sign off on the mechanism of action of the drug and said the the mechanism was unknown. The company found itself in the difficult position of try to sell an expensive drug with a label indicating that we don't know how it works and with the suggestion that it could kill people.

Not surprisingly, the drug has started slowly- currently about 6,000 scripts a week- or about $60 million per years. Critics have pointed to the cash burning postion of the company and slow growth so far for the scripts.

I am increasing upbeat regarding Ranexa- however. Why?

1)Because the drug works. I have used the drug in a variety of patients with remarkable success. Patients feel better on this med- with less pain, and many seem to have a sense of well being and health. In general, patients want to stop their meds, so in a few patients who I didn't think we getting any benefit, I recommended they come of Ranexa. In the majority of these cases, the patients didn't want to stop.

2) Because the drug not only works for angina, it also seems to work for diabetes. In the companies earlier trials, blood sugars improved substantially in the patients getting the drug- more even than trials with Januvia- Merck's new diabetes drug which is well on its way to commercial success. My patients often report that their sugars get better on the drug. Their most recent trial had a diabetes outcome as a secondary endpoint. These results haven't been released. The Harvard (TIMI) group who ran the trial says that this data hasn't yet been fully analyzed. Analysts, such as those from Merrill Lynch, have interpreted this as an indication that this endpoint was negative. My strong hunch is that they are wrong. The diabetes market is much much larger that the angina market and a drug as well tolerated as Ranexa with as much safety data could be a blockbuster.

3) The drug may also work in diastolic dysfunction- heart failure a result of stiffening of the heart. This is a common and difficult to treat condition. I have limited experience using Ranexa for this, but the head of the largest heart failure clinic in Chicago told me that he had seen very good responses in this population.

4) Because Ranexa will soon be easier to market. The MERLIN trial which was presented at the ACC a few months ago failed to show benefit in terms of preventing infarcts, but did show very impressive safety data. Fewer arrythmias than placebo and no increase in sudden death. The company has an agreement with the FDA indicating that the drug will get a first line indication without most of the warning language if no adverse trends were seen,

With regards to CVTX's other drugs, they are a mixed bag. Regadenoson is an agent for performing chemical stress testing- which was designed to be better than Adenosine. As far as I can tell, it is slightly better, but not as much as hope. This drug should succeed nicely though. Fujisawa who sell adenosine will be marketing this drug for CVTX and has every incentive to switch as many hospitals and offices to this new agent before adenosine goes off patent. Unfortunately, CVT seems to have given aware most of the profits- receiving on a 20% royalty. The market is currently about $300 million so CV could reasonable expect to receive at least 40-50 million assume a successful conversion of much of the market.

Their other drugs are less likely to lead to successful products. Tecadenosine is an agent to the IV treatment of tachycardia- a very small market- and will probably never see the market. Adentri is a drug for heart failure which was outlicensed several years ago to Biogen- who seems to have lost interest in the drug. The CEO of CVTX states that Biogen has indicated to him that late stage trials are to start soon, but I could find no mention of the drug at all on Biogen's website when I looked last.

They are also a variety of other agents at various stages of trials. An agent for diabetes, one for asthma, and even a polymer for drug eluting stents. The company seems to have a wealth of good scientists.

In summary, CVT has a single drug on the market- which should develop into a successful product. It should sell roughly $3-400 million for angina. Potentially 1-1.5 billion if the diabetes indication happens. (This would likely require another trial and a partnership with a larger pharma to sell to internists and endocrinologists and would have to share this revenue.) The company will also see a revenue stream of around $50 million for Regadenoson.

The company with a market cap of under $800 million seems far too cheap here,