Griffin Securities, Inc., 17 State Street, NY, NY, 10004 www.GriffinSecurities.com 1 Please Review Disclosures on Page 17 of this Research Report CLINICAL DATA, INC. (NASDAQGM: CLDA) CLINICAL DATA STRIKES GOLD – WINS FDA APPROVAL FOR VIIBRYD™ (VILAZODONE) FOR TREATMENT OF MAJOR DEPRESSIVE DISORDER On January 21, 2011, the FDA approved CLDA‟s vilazodone, a new antidepressant, as a first line therapy for major depressive disorder (MDD). CLDA plans to market the new antidepressant under the brand name Viibryd. This is a transformative event for CLDA as Viibryd should represent a major new force in the antidepressant market, a market with $9.9 billion in drug sales in 2009. We had ascribed a high probability to an approval, and in our view, this de-risking event is likely to trigger upside share price action as investors take notice and Viibryd‟s value gains its well- deserved attention and appreciation. We reiterate our BUY rating and target price of $33.00. Clinical Data, Inc. (NasdaqGM: CLDA) is a pharmaceutical company with one approved drug and a pipeline of late- and early-stage drugs in development. Approved Drugs: Viibryd (vilazodone) for Major Depressive Disorder (MDD) Therapeutic Pipeline: Late stage: Stedivaze™ Phase III ASPECT-1 Trial Underway; Second Phase III Trial in Advanced Planning (Cardiac Stress Agent) Selected early stage: 8066 for pulmonary arterial hypertension (Orphan status) 313 for ophthalmic diseases, including glaucoma (partnered with Santen Pharmaceuticals) 844 for the treatment of Asthma and/or Diabetes (option agreement for an exclusive license by Novartis) We are updating coverage on Clinical Data, Inc. (NasdaqGM: CLDA) with a BUY rating, and we are reiterating our 12-month price target of $33.00 for CLDA shares. VIIBRYD (VILAZODONE) WINS FDA APPROVAL AND IS CLEARED FOR COMMERCIALIZATION: Viibryd approval is a de-risking event that is likely to trigger upside share price action as the new antidepressant’s value gains its well-deserved attention and appreciation; Based on our current models, our base case peak sales forecast is approximately $750 million; Closing Share Price (1/21/11) $15.03 52-Week Price Low / High $10.87 - $22.39 Mkt. Capitalization (issued) $450.2 MM Shares Outstanding (issued) 29.96 MM 12-month Target Price $33.00 Est. Net Cash (1/13/11)* $42.1 MM Convertible Debt (9/30/10) $50.0 MM Fiscal Year Ends March 31st Website www.clda.com *Est. net cash reported 1/12/11 in 8-K SEC filing Product Peak Revenue NPV Viibryd (Vilazodone) $749 MM $616 MM Stedivaze™ $448 MM $398 MM 12-Month Price Chart Source: BigCharts.com U.S. Research: Pharmaceuticals January 24, 2011 UPDATE AND BUY RECOMMENDATION CHRYSTYNA BEDRIJ 212-509-9500 CBEDRIJ@GRIFFINSECURITIES.COM KEITH A. MARKEY, PH.D. 212-514-7914 KMARKEY@GRIFFINSECURITIES.COM MARK MERRILL 646-442-1441 MMERRILL@GRIFFINSECURITIES.COM
Transcript
Griffin Securities, Inc., 17 State Street, NY, NY, 10004 www.GriffinSecurities.com 1 Please Review Disclosures on Page 17 of this Research Report
CLINICAL DATA, INC. (NASDAQGM: CLDA)
CLINICAL DATA STRIKES GOLD – WINS FDA APPROVAL FOR VIIBRYD™ (VILAZODONE) FOR
TREATMENT OF MAJOR DEPRESSIVE DISORDER
On January 21, 2011, the FDA approved CLDA‟s vilazodone, a new antidepressant, as a first line therapy for major depressive disorder (MDD). CLDA plans to market the new antidepressant under the brand name Viibryd. This is a transformative event for CLDA as Viibryd should represent a major new force in the antidepressant market, a market with $9.9 billion in drug sales in 2009. We had ascribed a high probability to an approval, and in our view, this de-risking event is likely to trigger upside share price action as investors take notice and Viibryd‟s value gains its well-deserved attention and appreciation. We reiterate our BUY rating and target price of $33.00.
Clinical Data, Inc. (NasdaqGM: CLDA) is a pharmaceutical company with one approved drug and a pipeline of late- and early-stage drugs in development.
Approved Drugs:
Viibryd (vilazodone) for Major Depressive Disorder (MDD)
Therapeutic Pipeline:
Late stage:
Stedivaze™ Phase III ASPECT-1 Trial Underway; Second Phase III Trial in Advanced Planning (Cardiac Stress Agent)
Selected early stage:
8066 for pulmonary arterial hypertension (Orphan status)
313 for ophthalmic diseases, including glaucoma (partnered with Santen Pharmaceuticals)
844 for the treatment of Asthma and/or Diabetes (option agreement for an exclusive license by Novartis)
We are updating coverage on Clinical Data, Inc. (NasdaqGM: CLDA) with a BUY rating, and we are reiterating our 12-month price target of $33.00 for CLDA shares.
VIIBRYD (VILAZODONE) WINS FDA APPROVAL AND IS CLEARED FOR COMMERCIALIZATION:
Viibryd approval is a de-risking event that is likely to trigger upside share price action as the new antidepressant’s value gains its well-deserved attention and appreciation;
Based on our current models, our base case peak sales forecast is approximately $750 million;
The efficacy and safety for major depressive disorder was established in multiple clinical trials, including two randomized, double-blind, placebo-controlled Phase III clinical trials and a 52-week long-term safety study. The data was consistent and robust and supported by data from approximately nearly 3,000 patients;
Viibryd was shown to effectively relieve depression as measured by the MADRS, HAM-D, and HAM-A scales; and
Viibryd offers physicians a new opportunity to help patients with depression, particularly those who suffer from major depressive disorder (MDD). The studies also showed that Viibryd has a similar effect on sexual function as a placebo pill. Given that treatment emergence sexual dysfunction is a frequent adverse effect of most antidepressants and is one of the predominant reasons for premature drug discontinuation, the availability of an antidepressant that may not cause sexual dysfunction is also an obvious positive.
STEDIVAZE™, AN EXTREMELY EXCITING AGENT, CONTINUES TO ADVANCE IN PHASE III CLINICAL TRIALS:
Stedivaze (apadenoson) is a selective A2A receptor agonist in development for use as a pharmacologic stress agent in myocardial perfusion imaging (MPI) scans, commonly called “cardiac stress tests”, used to identify symptoms of coronary artery disease (CAD). Stedivaze is an extremely exciting agent and data to date suggests that the agent is well tolerated with an excellent safety profile, including no unexpected increase in side effects, including chest pains, shortness of breath, and flushing. Stedivaze is currently in a Phase III clinical trial (called the ASPECT-1 trial), which began in November 2009, and a second Phase III clinical trial is in the advanced planning stages. The two Phase III trials are expected to enroll approximately 750 patients each over an 18–24 month period from trial initiation. The primary endpoint of the ASPECT-1 trial is non-inferiority to adenosine. Additionally, when Stedivaze Phase II data is compared to Lexiscan Phase II data, it suggests that Stedivaze should be comparable to Lexiscan in terms of efficacy, however Stedivaze should better Lexiscan’s side effect profile. We forecast annual peak sales of $448 million and a net present value of $398 million for the Stedivaze program.
OUR VALUATION MODEL SUPPORTS A VALUE OF $33.00 PER SHARE. WE REITERATE OUR BUY
RATING:
Our target price is derived by summing the following base case components of Clinical Data’s programs: Viibryd net present value (NPV) of $616 million (based on our base case estimates of peak sales of $749 million in CY2017) and Stedivaze NPV of $398 million (based on our base case estimates of peak sales of $448 million in CY2018. The company currently holds estimated net cash of $42.1 million to support its key business initiatives. Together, with adjustments to calculate free cash flow, these two programs by themselves, using a discounted cash flow valuation approach, suggest a target price of $33.00 per share. Other pipeline products are likely to create additional long-term value, including 8066 for pulmonary arterial hypertension, 844 for the treatment of Asthma and/or Diabetes (option agreement for an exclusive license by Novartis), and 313 for ophthalmic diseases, including glaucoma (partnered with Santen Pharmaceuticals).
GRIFFIN SECURITIES EQUITY RESEARCH 3
Clinical Data, Inc. January 24, 2011
VIIBRYD™ (ANTIDEPRESSANT) Viibryd (vilazodone), a novel, dual-acting serotonergic antidepressant, is a potent and selective serotonin reuptake inhibitor, or SSRI, first line therapy for major depressive disorder (MDD), and partial agonist of the 5-hydroxytryptamine 1a, or 5-HT1A, receptor. Viibryd was approved by the FDA on January 21, 2011, for use as a treatment option for major depressive disorder. Viibryd completed two randomized, double-blind, placebo-controlled Phase III clinical trials and a 52-week long-term safety study. The primary endpoints and multiple secondary endpoints of each trial were achieved with statistical significance related to depression as measured by the MADRS, HAM-D, and HAM-A scales. In addition, overall dropout rates were low. Viibryd’s approval was supported by data from nearly 3,000 patients who have received the drug safely with a low occurrence of side effects. In addition, there was no significant difference between placebo and Viibryd in terms of sexual dysfunction, as measured by validated scales (ASEX and CSFQ) showing numerical comparability to placebo.
1 Given that treatment-emergence sexual dysfunction is a frequent adverse effect
of most antidepressants and is one of the predominant reasons for premature drug discontinuation, the availability of an antidepressant that does not cause sexual dysfunction is also a positive. We believe that Viibryd will represent a major force in the depression market, the fourth largest pharmaceutical market in the U.S. with $9.9 billion in sales in 2009. We forecast peak annual sales of Viibryd reaching approximately $750 million.
VIIBRYD: COMMERCIAL OUTLOOK
Based on our internal assumptions and revenue model, we project peak revenue of $749 million in CY2017. Following FDA approval, we assume that Viibryd will be launched commercially in CY2011 (FY2012). Figure 1 shows our projected sales for MDD in the U.S.
Figure 1: Griffin Securities: Viibryd Revenue Forecast for MDD in the U.S. ($ in „000s)
Source: Griffin Securities, Inc.
The following revenue assumptions refer to our internal forecast for US sales of Viibryd in major depressive disorder (MDD) only, excluding potential sales for GAD and/or other indications. The revenue assumptions also exclude international sales or partnership or collaboration opportunities.
1 Clinical Data Analyst Day. Presentation by Dr. Carol Reed on “Depression, Its Treatment, and Sexual Function”. October 2009.
There are 211,000,000 antidepressant prescriptions written annually2;
Approximately 60% of the antidepressant prescriptions written are written for the major depressive disorder (MDD) indication
3;
Viibryd penetrates the market beginning in FY2012 (CY2011) at a price of $114 per prescription4;
The price per prescription grows at an annual rate of 4%5;
Viibryd penetrates 0.3% of the addressable market in launch year and reaches a peak penetration of 3% of the addressable market in FY2018
6; and
The Viibryd patent expires in FY2020.
(Intentionally left blank)
2 IMS Health’s National Prescription Audit 2009. 3 IMS Health’s National Drug and Therapeutic Index 2006.
4 IMS Health’s National Prescription Audit 2008. The estimated price of $114.36 is the weighted-average price of branded
antidepressants with total number of prescriptions greater than 10 million in 2008 (Lexapro, Cymbalta, and Effexor) discounted with a blended rebate of 6%. 5 The average annual prescription price growth rates for Lexapro, Cymbalta, and Effexor XR since 2004 are 7%, 5%, and 5%,
respectively. 6 Viibryd’s estimated launch curve is consistent with the launch curves of Cymbalta and Lexapro.
Viibryd (vilazodone): Depression
Number of Total Prescriptions 211,000,000 Year penetration starts 2012
Percent of Total Addressable 60% Starting penetration as % of peak 10.0%
Addressable Market Growth Rate 2% Years to reach peak penetration 6
Price per Prescription (Net) $114 Peak penetration 3%
Treatment price growth 4% Duration of peak penetration in years 3
Clinical Progress 2nd Phase III Royalty rate (payable to MRK) 10%
GRIFFIN SECURITIES EQUITY RESEARCH 5
Clinical Data, Inc. January 24, 2011
STEDIVAZE™ (PHARMACOLOGIC STRESS AGENT) Stedivaze (apadenoson), a selective A2A receptor agonist, is in clinical development for use as a pharmacologic stress agent in myocardial perfusion imaging (MPI) scans. MPI scans, commonly called cardiac stress tests, are used to identify symptoms of coronary artery disease (CAD), including areas of poor blood flow in the heart caused by the formation of atheromatous plaques. A pharmacologic stress agent is used to temporarily increase blood flow through coronary arteries during stress testing so artery functionality can be accurately assessed. The A2A adenosine receptor is the receptor subtype responsible for coronary vasodilation, or the widening of blood vessels.
7 We believe that a pharmacologic stress agent like
Stedivaze, with the potential for a reduced side-effect profile, would offer a potentially best in class option for diagnosing coronary artery disease in patients who cannot undergo an exercise test. Stedivaze has completed Phase II studies, and a Phase III study commenced in November 2009.
STEDIVAZE: PHASE III ASPECT-1 TRIAL UNDERWAY
CLDA announced on November 18, 2009, that the first patient was enrolled in its initial Phase III clinical trial (ASPECT-1). The trial is a randomized, double blind, active control study that will enroll approximately 750 patients over an 18 to 24 month time period. The Phase III trial will evaluate the efficacy of Stedivaze as a pharmacologic stress agent and compare its safety and tolerability to adenosine, a current standard option used for pharmacologic stress testing.
8
Stedivaze Phase III ASPECT-1 Study Details
Dosing: Single bolus IV injection of 100 or 150 ug
Patients: Estimated enrollment of approximately 750 patients.
Endpoints:
Primary: Presence of myocardial perfusion defect as based on SPECT-MPI.
Secondary: Incidence and patient rated intensity of most commonly reported side effects associated with use of adenosine in SPECT-MPI.
(Intentionally left blank)
7 Shryock, J.C., Snowdy, S., Baraldi, P.G., et al., “A2A – Adenosine Receptor Reserve for Coronary Vasodilation,” Circulation, 1998:
98, pp. 711-718. 8 Clinical Data, Inc. press release, “Clinical Data Initiates Phase III Trial of Stedivaze for Cardiac Stress Testing” Nov. 18, 2009.
GRIFFIN SECURITIES EQUITY RESEARCH 6
Clinical Data, Inc. January 24, 2011
STEDIVAZE: COMMERCIAL OUTLOOK
Based on our internal assumptions and revenue model, we project peak revenue of $523 million in CY2018 (FY2019). Figure 2 shows our projected Stedivaze sales.
Figure 2: Griffin Securities: Stedivaze Revenue Forecast in the U.S. ($ in „000s)
Source: Griffin Securities, Inc. The following revenue assumptions refer to US sales of Stedivaze as a pharmacologic stress agent for use in MPI scans. The revenue assumptions exclude international sales or partnership or collaboration opportunities.
Source: Griffin Securities, Inc.
Key Assumptions:
Approximately 16 million Americans are affected by coronary artery disease on an annual basis and between 7.5 million and 9.3 million patients (approximately 50%) will receive myocardial perfusion imaging scans. Approximately 50% of the 8.4 million patients, or 4.2 million, require the use of a pharmacologic stress agent
9,10;
Of the patients that receive a pharmacologic stress agent, 100% are addressable by Stedivaze;
The addressable market will grow at an annual rate of 10% from FY2010 through FY2015 and an annual rate of 3% from FY2015 through perpetuity
11;
9 According to the American Heart Association (2008), approximately 16 million Americans have coronary heart disease.
10 According to Astellas Pharma US, Inc., 7.5 million to 9.3 million MPI scans are performed annually, and 50% require a
pharmacologic stress agent.. Astellas press release, June 24, 2008, “Astellas Launches Lexiscan (Regadenoson) Injection for use as a Pharmacologic Stress Agent in Radionuclide Myocardial Perfusion Imaging (MPI).” 11
According to AMR data, the compounded annual growth rate of pharmacologic MPIs since 1996 is 11.6%. We assume an annual growth rate of 10% will continue through 2014 as better agents (like selective A2A agonists) drive adoption of pharmacologic scans do to improved AE profiles and ease of use. Additionally, our model does not take into account other modalities such as MRI and Echo which are likely to contribute to growth rates as switchover occurs. Finally, changing demographics, such as population aging and greater rates of obesity, are expected to contribute to overall growth in cardiovascular disease and related cardiovascular imaging market..
Years between penetration start and peak 4 Addressable Market Growth Rate 10%,3%
Peak penetration 30.0% Price per Scan $188
Duration of peak penetration in years 2 Treatment price growth 3%
Clinical Progress Phase III Royalty rate 5%
GRIFFIN SECURITIES EQUITY RESEARCH 7
Clinical Data, Inc. January 24, 2011
Stedivaze penetrates the market beginning in FY2015 at a price of $188 per vial growing 3% annually
12;
Stedivaze penetrates 4% of the market in launch year with a peak penetration of 30% reached in FY2019. Assumes penetration rates begin to decline following the expiration of CorVue’s patent in FY2018 and following the expiration of Lexiscan’s patent in FY2025
13; and
Stedivaze’s patent expires in FY2027.14
(Intentionally left blank)
12
The Red Book average wholesale price (AWP) of Lexiscan is $242.82. The Wholesale Acquisition Cost (WAC) for Lexiscan is $202.35. We assume approximately 7% in total discounts (including a 2% wholesaler discount and a 5% hospital/GPO discount) from the WAC, which results in a discounted price of $188.19 in 2009. Given that Stedivaze™ has “best-in-class” potential, it may eventually command a premium price to Lexiscan™; however, our model does not include this upside. 13
We assume a 35% penetration for several reasons. First, the market is relatively undeveloped with two primary products, AdenoScan (adenosine) and Persantine (dipyridamole), holding combined 90% market share. Second, it is expected that Lexiscan will cannibalize AdenoScan as both are marketed by Astellas. Third, Stedivaze has best-in-class attributes as compared to AdenoScan, Lexiscan, and CorVue because it is administered by bolus injection and it has an improved AE profile. Note Corvue’s fate is unclear given that the FDA panel voted against CorVue in October 2009, saying the data did not prove the drug was as effective as adenosine. While Lexiscan and CorVue (if ever approved) are administered by bolus injection, they have comparable AE profiles to AdenoScan. Fourth, AdenoScan (adenosine) will only become generic in 2012 (although it should be largely replaced by Lexiscan). CorVue (if ever approved) will be generic in 2017, and Lexiscan will be generic in 2024; thus, we anticipate minimal generic competition until 2017. We also assume Lexiscan will have substantially cannibalized AdenoScan by the time a generic version is available, and physicians will be hesitant to switch due to the reduced costs and ease of use associated with bolus dosing. 14
The Stedivaze patent estate includes a 1999 composition of matter patent that provides protection through 2024 (assuming a five-year extension from expiration in 2019) and a 2008 unit dosing patent that provides coverage through 2033 (assuming a five-year extension from expiration in 2028). The model assumes the unit-dose patent will provide protection through 2026.
GRIFFIN SECURITIES EQUITY RESEARCH 8
Clinical Data, Inc. January 24, 2011
OTHER THERAPEUTICS IN DEVELOPMENT
8066 (Pulmonary Arterial Hypertension). 8066 is a small molecule, antihypertensive, serotonin 2B (5-HT2B) receptor antagonist, in development for the oral treatment of pulmonary arterial hypertension (PAH) and related disorders. In November 2010, 8066 received Orphan Drug status for pulmonary arterial hypertension in the US.
313 (Ophthalmic diseases, B-cell cancers, and pain). 313 is a selective AR2A agonist in preclinical development as a topical treatment for glaucoma that has shown significant effects on lowering intra-ocular pressure in both small and large animal models. Santen Pharmaceutical, CLDA’s ophthalmic partner, has exercised its option to further develop 313 for the treatment of glaucoma and plans to file an IND for the drug with the FDA for this indication, expected within the next 12 months. 313 is also in development as a treatment option for B-cell cancers, such as multiple myeloma, subject to a license agreement with Zalicus Inc. (NasdaqGM: ZLCS) (formerly CombinatoRx, Inc.). Zalicus is responsible for both preclinical and clinical development under the terms of the collaboration.
844 (Asthma & Diabetes). CLDA is developing 844 for the treatment of asthma and/or diabetes. Acting as an AR2B antagonist, this compound has shown significant pharmacodynamic effects in animal models for both asthma and diabetes. The Company is proceeding with a toxicology and chemistry program and, with success, it is expected that they will file and IND to continue development of this compound in human trials. 844 is also the subject of an option agreement for an exclusive license by Novartis for the treatment of asthma and diabetes.
1222 (Inflammation). 1222 is a highly selective adenosine 2A receptor agonist in development as an anti-inflammatory agent for the treatment of acute inflammatory conditions based on effects demonstrated in animal models. 1222 is being evaluated in pharmacodynamic studies and, with success, we would expect to file an IND to continue the development of this compound in human trials.
(Intentionally left blank)
GRIFFIN SECURITIES EQUITY RESEARCH 9
Clinical Data, Inc. January 24, 2011
INVESTMENT CONCERNS AND RISKS For a complete description of risks and uncertainties related to Clinical Data, Inc.‟s business, see the “Risk Factors” section in Clinical Data‟s SEC filings, which can be accessed directly from the SEC Edgar filings at www.sec.gov. Potential risks include: Stock risk and market risk: There is a limited trading market for the Company’s common stock.
There can be no assurance that an active and liquid trading market will develop or, if developed, that it will be sustained, which could limit one’s ability to buy or sell the Company’s common stock at a desired price. Investors should also consider technical risks common to many small-cap or micro-cap stock investments, such as small float, risk of dilution, dependence upon key personnel, and the strength of competitors that may be larger and better capitalized.
New and rapidly changing field: The pharmaceutical and biotechnological markets are rapidly evolving, and research and development are expected to continue at an accelerated pace with increased frequency. Other companies are also actively engaged in the development of therapies to directly or indirectly treat those disorders being pursued by Clinical Data. These companies may have substantially greater research and development capabilities, as well as significantly greater marketing, financial, and human resources abilities than Clinical Data.
Products still in development phases: Although the Company intends to continue with clinical development of Stedivaze, a cardiac stress agent, and other pipeline candidates in various indications, the successful development of the Company’s product candidates is uncertain. Product development costs and timelines can vary significantly for each product candidate and are difficult to accurately predict. In addition, products in development that appear to be promising may not reach commercialization for various reasons, including failure to achieve regulatory approvals, safety concerns, and/or the inability to be manufactured at a reasonable cost.
Funding requirements: It is difficult to predict the Company’s future capital requirements. The Company may need additional financing to continue funding the research and development of its products and to expand its business. There is no guarantee that it can secure the desired future capital or, if sufficient capital is secured, that current shareholders will not suffer significant dilution.
Regulatory risk: Various statutes and regulations also govern or influence the manufacturing, safety, labeling, storage, record keeping and marketing of each product. The lengthy process of seeking approval and the subsequent compliance with applicable statutes and regulations require the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect Clinical Data’s business. There is no guarantee that Clinical Data’s products will be approved by the U.S. Food and Drug Administration (FDA) or international regulatory bodies for marketing in the U.S. or abroad.
The Company may need to raise additional capital, which may not be available on terms acceptable to them, if at all: As the Company continues to expand their research and development and sales and marketing activities, they may need to raise additional capital, which may not be available on terms acceptable to them, if at all. If the Company cannot raise necessary additional capital on acceptable terms, they may not be able to increase sales, develop or enhance their products and services, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements, any of which could cause their business to suffer.
Competitive risk: The biotechnology industry is extremely competitive, mainly due to its large market potential. Many companies are developing products for the same therapeutic indications targeted by Clinical Data. These companies may have substantially more resources than Clinical Data, which could adversely affect the Company’s position in the market place.
GRIFFIN SECURITIES EQUITY RESEARCH 10
Clinical Data, Inc. January 24, 2011
FINANCIAL FORECASTS & VALUATION The following assumptions refer to CLDA’s revenue model, annual earnings model, and valuation analysis. The revenue estimates are for Viibryd sales revenue in the US (excluding revenue from international sales or partnership or collaboration opportunities in the US or internationally) and Stedivaze sales revenue in the US (excluding revenue from international sales or partnership or collaboration opportunities in the US or internationally). We have also not included potential upfront fees or milestone revenue from, nor expenses associated with, CLDA’s early stage product candidates. Given that we expect CLDA to seek partnerships and/or monetize some of these assets, we treat these products as valuation-neutral to our model.
HISTORICAL BALANCE SHEET
$ in thousands, except per share data
FY ending March 31
ASSETS 30-Sep-10 31-Mar-10
Current Assets:
Cash and cash equivalents 47,027$ 49,245$
Marketable securities - -
Accounts receivable, net 2,972 2,851
Prepaid expenses / other current assets 1,543 1,488
Assets of discontinued operations - -
Total Current Assets: 51,542 53,584
Marketable securities - -
Property, plant and equipment, net 2,317 2,795
Goodwill 31,849 31,849
Intangible assets, net 9,791 10,665
Other assets, net 61 62
Assets of discontinued operations - -
TOTAL ASSETS: 95,560$ 98,955$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt 6,115$ 6,635$
Current portion of capital leases 143 138
Accounts payable 2,355 5,550
Accrued expenses 9,864 25,065
Customer advances and deferred revenue - -
Other current liabilities - -
Liabilities of discountinued operations - -
Total current liabilities: 18,477 37,388
Long-Term Liabilities:
Long-term debt, net of current portion 8,800 11,329
Convertible note payable, net of unamortized discount 30,878 30,129
Capital lease obligations, net of current portion 84 157
Contingent acquisition costs 15,372 16,039
Other Long-term Liabilities 15 20
Liabilities of discontinued operations - -
Total long-term liabilities: 55,149 57,674
Stockholders' Equity:
Preferred Stock - -
Common stock 299 265
Additional paid-in capital 391,886 343,345
Accumulated deficit (370,251) (339,717)
Treasury stock - -
Deferred compensation - -
Accumulated other comprehensive income - -
Total stockholders' equity: 21,934 3,893
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 95,560$ 98,955$
GRIFFIN SECURITIES EQUITY RESEARCH 11
Clinical Data, Inc. January 24, 2011
REVENUE ASSUMPTIONS
The following revenue assumptions refer to US sales of Viibryd in major depressive disorder (MDD) only, excluding potential sales from other indications such as general anxiety disorder (GAD), and US sales of Stedivaze. The revenue assumptions exclude international sales and/or partnership or collaboration opportunities in the US or international markets.
Viibryd Assumptions:
There are 211,000,000 antidepressant prescriptions written annually15
;
Approximately 60% of the antidepressant prescriptions written are written for the major depressive disorder (MDD) indication
16;
Viibryd penetrates the market beginning in FY2012 (CY2011) at a price of $114 per prescription17
;
The price per prescription grows at an annual rate of 4%18
;
Viibryd penetrates 0.3% of the addressable market in launch year and reaches a peak penetration of 3% of the addressable market in FY2018
19; and
The Viibryd patent expires in FY2020.
Stedivaze Assumptions:
Approximately 16 million Americans are affected by coronary artery disease on an annual basis and between 7.5 million and 9.3 million patients (approximately 50%) will receive myocardial perfusion imaging scans. Approximately 50% of the 8.4 million patients, or 4.2 million, require the use of a pharmacologic stress agent
20,21;
Of the patients that receive a pharmacologic stress agent, 100% are addressable by Stedivaze;
15 IMS Health’s National Prescription Audit 2009. 16
IMS Health’s National Drug and Therapeutic Index 2006. 17
IMS Health’s National Prescription Audit 2008. The estimated price of $114.36 is the weighted-average price of branded antidepressants with total number of prescriptions greater than 10 million in 2008 (Lexapro, Cymbalta, and Effexor) discounted with a blended rebate of 6%. 18
The average annual prescription price growth rates for Lexapro, Cymbalta, and Effexor XR since 2004 are 7%, 5%, and 5%, respectively. 19
Vilazodone’s estimated launch curve is consistent with the launch curves of Cymbalta and Lexapro. 20
According to the American Heart Association (2008), approximately 16 million Americans have coronary heart disease. 21
According to Astellas Pharma US, Inc., 7.5 million to 9.3 million MPI scans are performed annually, and 50% require a pharmacologic stress agent.. Astellas press release, June 24, 2008, “Astellas Launches Lexiscan (Regadenoson) Injection for use as a Pharmacologic Stress Agent in Radionuclide Myocardial Perfusion Imaging (MPI).”
Viibryd (vilazodone): Depression
Number of Total Prescriptions 211,000,000 Year penetration starts 2012
Percent of Total Addressable 60% Starting penetration as % of peak 10.0%
Addressable Market Growth Rate 2% Years to reach peak penetration 6
Price per Prescription (Net) $114 Peak penetration 3%
Treatment price growth 4% Duration of peak penetration in years 3
Clinical Progress 2nd Phase III Royalty rate (payable to MRK) 10%
Stedivaze™ (apadenoson): Cardiovascular Imaging
Year penetration starts FY2015 Number of Procedures 4,200,000
Years between penetration start and peak 4 Addressable Market Growth Rate 10%,3%
Peak penetration 30.0% Price per Scan $188
Duration of peak penetration in years 2 Treatment price growth 3%
Clinical Progress Phase III Royalty rate 5%
GRIFFIN SECURITIES EQUITY RESEARCH 12
Clinical Data, Inc. January 24, 2011
The addressable market will grow at an annual rate of 10% from FY2010 through FY2015 and an annual rate of 3% from FY2015 through perpetuity
22;
Stedivaze penetrates the market beginning in FY2015 at a price of $188 per vial growing 3% annually
23;
Stedivaze penetrates 4% of the market in launch year with a peak penetration of 30% reached in FY2019. Assumes penetration rates begin to decline following the expiration of CorVue’s patent in FY2018 and following the expiration of Lexiscan’s patent in FY2025
24; and
Stedivaze’s patent expires in FY2027.25
(Intentionally left blank)
22
According to AMR data, the compounded annual growth rate of pharmacologic MPIs since 1996 is 11.6%. We assume an annual growth rate of 10% will continue through 2014 as better agents (like selective A2A agonists) drive adoption of pharmacologic scans do to improved AE profiles and ease of use. Additionally, our model does not take into account other modalities such as MRI and Echo which are likely to contribute to growth rates as switchover occurs. Finally, changing demographics, such as population aging and greater rates of obesity, are expected to contribute to overall growth in cardiovascular disease and related cardiovascular imaging market.. 23
The Red Book average wholesale price (AWP) of Lexiscan is $242.82. The Wholesale Acquisition Cost (WAC) for Lexiscan is $202.35. We assume approximately 7% in total discounts (including a 2% wholesaler discount and a 5% hospital/GPO discount) from the WAC, which results in a discounted price of $188.19 in 2009. Given that Stedivaze™ has “best-in-class” potential, it may eventually command a premium price to Lexiscan™; however, our model does not include this upside. 24
We assume a 35% penetration for several reasons. First, the market is relatively undeveloped with two primary products, AdenoScan (adenosine) and Persantine (dipyridamole), holding combined 90% market share. Second, it is expected that Lexiscan will cannibalize AdenoScan as both are marketed by Astellas. Third, Stedivaze has best-in-class attributes as compared to AdenoScan, Lexiscan, and CorVue because it is administered by bolus injection and it has an improved AE profile. Note Corvue’s fate is unclear given that the FDA panel voted against CorVue in October 2009, saying the data did not prove the drug was as effective as adenosine. While Lexiscan and CorVue (if ever approved) are administered by bolus injection, they have comparable AE profiles to AdenoScan. Fourth, AdenoScan (adenosine) will only become generic in 2012 (although it should be largely replaced by Lexiscan). CorVue (if ever approved) will be generic in 2017, and Lexiscan will be generic in 2024; thus, we anticipate minimal generic competition until 2017. We also assume Lexiscan will have substantially cannibalized AdenoScan by the time a generic version is available, and physicians will be hesitant to switch due to the reduced costs and ease of use associated with bolus dosing. 25
The Stedivaze patent estate includes a 1999 composition of matter patent that provides protection through 2024 (assuming a five-year extension from expiration in 2019) and a 2008 unit dosing patent that provides coverage through 2033 (assuming a five-year extension from expiration in 2028). The model assumes the unit-dose patent will provide protection through 2026.
GRIFFIN SECURITIES EQUITY RESEARCH 13
Clinical Data, Inc. January 24, 2011
CASHFLOW MODEL
Viibryd
Assumptions:
CLDA will receive 100% of total sales, net a 10% royalty due to Merck KGaA for acquiring the rights to Viibryd;
Any potential milestones payable to Merck KGaA will be paid in stock; therefore, they will have no impact on CLDA’s cashflows;
COGS are approximately 9% of total sales;
SG&A expenses include a sales force of 500 reps at a fully-loaded cost of $225,000 per rep plus expenses for promotional materials, samples, advertising agency, and journal ads. There are a number of sales force options that could be pursued, such as, a highly specialized sales force to target the internal, high prescribers, a co promotion agreement with another pharmaceutical company, or operating through a contract sales organization (CSO).
R&D expenses of $30.9 million in FY2010 for manufacturing batches, NDA filing, and other pre-launch activities, $2 million in FY2011 for launch preparation, $5 million in FY2012, $10 million from FY2013 to FY2020, and $1 million from FY2020 through perpetuity following patent expiration in FY2020.
$ in thousands 2010A 2011E 2012E 2013E 2014E 2015E
Revenue
Drug Sales - - 52,569 167,297 354,938 502,024
Milestones - - - - - -
Total Revenue -$ -$ 52,569$ 167,297$ 354,938$ 502,024$
CLDA will receive 100% of total sales, net a 5% royalty due to the University of Virginia for the rights to Stedivaze™;
CLDA will pay ATG cash milestones of $5 million in FY2014, $10 million in FY2015, and $15 million in FY2017;
CLDA is responsible for all Stedivaze-related costs, including COGS, SG&A, and R&D;
COGS are approximately $4.75 per vial, including approximately $1.50 per vial for shipping and distribution, $1.75 per vial for warehousing, and $1.50 per vial for manufacturing;
26
S&M expenses includes a sales force of 100 reps at a fully-loaded cost of $200,000 per rep and expenses for promotional materials, advertising agency, and journal ads;
R&D expenses of $5.8 million in FY2010, $28 million in FY2011, $25,000 million in FY2012, $15,000 million in FY 2013, $2 million in FY2014, and $1 million in FY2015 through perpetuity. These assumptions include expenses for two pivotal Phase III trials of Stedivaze, two Phase I feasibility studies in patients with asthma and COPD, as well as various other small proof-of-concept-studies.
26
Favorable COGS are driven by the potency of apadenoson (Stedivaze). On average, each dose contains approximately 125 μg of apadenoson active pharmaceutical ingredient (API); thus, one gram of apadenoson API should yield approximately 8000 doses.
$ in thousands 2010A 2011E 2012E 2013E 2014E 2015E
Interest expense includes interest and principal payments for the $22 million, five-year note bearing interest at 6% and the $3.2 million, 32-month note bearing interest at 11% entered into during the acquisition of Adenosine Therapeutics in August 2008, and the $50 million convertible debt financing bearing interest at 9.72% due February 2017;
Diluted shares outstanding include approximately 6.1 million shares issuable upon the conversion of convertible notes and approximately 4.3 million shares issuable upon the exercise of warrants;
Mix of debt and equity financings in FY2011 and FY2012 to fund ongoing clinical trials for Stedivaze and sales and marketing efforts for the commercialization of Viibryd and Stedivaze, upon approval; and
SG&A includes $6 million annually for, among other expenses, costs associated with audits, insurance, Sarbanes-Oxley, as well as M&A activity. SG&A also includes sample manufacturing and distribution expenses along with other costs associated with pre-launch activity for Viibryd.
FY ending March 31 2011 2012 2013 2014 2015
($ in thousands, except per share data)
2011 2012 2013 2014 2015
Total revenue 12,000$ 52,569$ 167,297$ 354,938$ 568,428$
Terminal Value as % Enterprise Value Implied EBITDA Multiple
Discounted
Cash Flows
(2008 - 2023)
PV of Terminal Value at a
Perpetual growth rate of rFCF Enterprise Value
Total Equity Value Value per Diluted Share
GRIFFIN SECURITIES EQUITY RESEARCH 17
Clinical Data, Inc. January 24, 2011
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