Gilead’s $1.4B bid wins nod from CVT’s board

Astellas' three offers fail to entice CV Therapeutics

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FOSTER CITY, Calif.—Speculation has been rife that an offer for CV Therapeutics (CVT) might go as high as $20 per share, but few expected the suitor to be Gilead Sciences Inc. rather than Astellas Pharma Inc., which had tendered three prior offers—the last on Feb. 27.

Astellas' third and final bid, at $16 per share, was considered on the low side by analysts, but it nevertheless came as a surprise when Gilead announced the signing of a definitive agreement to acquire CVT for $20 per share in cash—or $1.4 billion—from its more than $3 billion reserves through a tender offer and second-step merger.

CV Therapeutics' board has unanimously approved the transaction and will recommend to its stockholders that they tender their shares. CV Therapeutics will become a wholly owned subsidiary of Gilead when the tender offer closes during the second quarter of this year.

Speaking for CV Therapeutics, Chairman and CEO Louis Lange said in a statement, "We are very pleased with the offer Gilead presented, which we believe represents compelling value for our shareholders."

Jason Napodano, a Zacks Investment Research analyst, was one of those who advised CVT stockholders to hold out for a higher offer from Astellas. Zacks' model predicts CVT will be profitable by 2010-11 and trading at about 15-times 2013 earnings, or in the same league with other profitable biotechs such as Genentech and Amgen. Gilead, he believes, is interested in a lot more than CVT's two marketed products; Ranexa (ranolazine extended-release tablets), indicated for the treatment of chronic angina, and Lexiscan (regadenoson), an injection for use as a pharmacologic stress agent in radionuclide myocardial perfusion imaging in patients unable to undergo adequate exercise stress.

Napodano reasons that it's CVT's "whole infrastructure that's worth perhaps $200 million to Gilead. Gilead needs to diversify," he says, "and CVT has the expertise in cardiovascular drug development and NDA processing, as well as a 170-representative sales force. This gives Gilead a cardiovascular franchise along with annual Ranexa sales of about $160 million."

In November 2008, Ranexa received an updated label and is now indicated for first-line therapy, alone or in combination with traditional therapies, such as beta blockers, calcium channel blockers and nitrates.

"This revised labeling provides a tremendous opportunity to relaunch Ranexa and build upon its prior success," Dr. John C. Martin, Gilead Chairman and CEO, told a dozen analysts via conference call subsequent to the announcement. "We believe the in-depth knowledge of the Ranexa cardiology sales force paired with our commercial operations, resources and expertise will allow us to have a significant impact on the success of CV Therapeutics' efforts to expand the usage of Ranexa for patients in need.

In terms of this potential, Gilead COO John Milligan told the analysts that there are about 10 million patients in the U.S. with chronic angina, and that while Ranexa certainly has competition, "there are only about 75,000 who are currently taking Ranexa," with about 1 million chronic angina patients being the first target.

When darusentan—Gilead's drug candidate for treating uncontrolled hypertension—was brought into the Q&A by analysts, it became clear that Gilead expects there to be some overlap between cardiologists treating pulmonary arterial hypertension and also potentially prescribing Ranexa. Added Milligan: "We won't have any data on darusentan until the second quarter. But I would say this about this acquisition, which is I think that having the CVT team on board with their clinical and regulatory expertise, this gives us a much, much better chance of having that better label (for darusentan) going forward."

But Kevin Young, Gilead's executive VP of commercial operations, kept the focus on Ranexa. "The asset that CVT has, Ranexa, we think is a phenomenal product with a huge potential. With this new label, it doesn't have any competition. And certainly, when you have moved on from the classical long-acting nitrates, beta-blockers and calcium antagonists, this product has a really strong role to play in symptomatic relief (with) no bradycardia. So we are very much seeing this purchase today with CVT as around Ranexa. That is what we are doing this for. So the additional benefit it has is the potential to provide us with a platform for darusentan."

Shareholder lawsuit: 'The transaction appears to be unfair'

Three days after the deal was struck between Gilead and CV Therapeutics, New York law firm Levi & Korsinsky announced its opposition on behalf of CVT shareholders via a statement found on the Internet and subsequently confirmed with the firm's associate Juan Monteverde.

Monteverde stated that a complaint has been filed in the appropriate court. The statement quotes CVT CEO Louis Lange as saying, in part, that "2008 was an exceptional year for CV Therapeutics and its shareholders, as we received three major regulatory approvals, retired more than $100 million in debt, completed two major strategic transactions bringing in more than $250 million in non-dilutive net cash, grew our Ranexa business by 65 percent year-over-year, and saw our share price outperform the NASDAQ by more than 40 percent."

The law firm noted that Lange also looked for 2009 to be "another outstanding year" and contends that under the terms of the agreement "CV Therapeutics shareholders will not participate in the company's bright future."

The firm also noted that on the first trading day after the announcement, CVT shares traded in excess of the $20 per share transaction price, "indicating that shareholders believe that the company's true value is higher." At press time, CVT's stock was at $19.89.

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