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Biotech / Medical : Cardiome -- CRME
CRME 2.330-2.1%May 16 5:00 PM EST

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From: Ian@SI8/20/2010 3:21:06 PM
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BUY OR SELL-Cardiome drug delay: mild stroke or intensive care?

Thomson Reuters

* Bulls say drug delay not a significant issue

* Bears concerned over lack of visibility, catalysts

* Shares off 15 pct since trial delay news on Aug. 11
(For more BUY or SELL articles, click [BUYSELL/]

By Esha Dey and Bhaswati Mukhopadhyay

BANGALORE, Aug 20 (Reuters) - Cardiome Pharma Corp's
shares have dropped 15 percent in seven sessions after
Merck & Co Inc , its development partner, postponed a
late-stage trial of a heart drug.

Before Aug. 11, the Vancouver-based firm's stock had nearly
doubled in 12 months. Cardiome and Merck are developing
vernakalant, an oral drug to treat chronic atrial fibrillation
(AF) -- a heart rhythm disorder that can lead to stroke and
heart failure.

The partners gave no reason for delaying the trial,
scheduled to start this summer. Nor did they say how long the
delay would be.

Stock price Graphic: link.reuters.com

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Cardiome is also working with Japan's Astellas Pharma
to get approval for an intravenous version of the drug
targetted at acute attacks of atrial fibrillation (AF).

While some analysts still believe in the potential for
vernakalant, especially given the strength of its partner,
Merck, others are concerned over the delay, the uncertainty and
the lack of near-term catalysts for Cardiome.

NO DEEP IMPACT

Bret Holley of Oppenheimer & Co reckons vernakalant has the
potential to grab a significant share of the AF market.

On approval, the drug would compete with Sanofi-Aventis' heart drug Multaq -- also known as dronedarone --
which brought in January-June revenue of more than $81 million.

While Multaq is used in AF patients, it's actually approved
only to reduce the risk of adverse cardiovascular activity and
events.

"Therein lies an exploitable difference between what
(Cardiome/Merck) could get as a label for vernakalant and what
exists for dronedarone," said Holley, who rates Cardiome
"outperform".

AF is the most common heart disorder, affecting 2.2 million
Americans and 10 million people worldwide each year. Devices
made by St. Jude Medical Inc and Medtronic and
several blood thinners are also used to treat AF.

Holley sees no significant impact on Cardiome from what he
expects to be a 3-6 month delay in the trial, and reckons the
hold-up is due to Merck taking its time to decide on the study
design so as to position the drug in the right patient market.

He predicts the oral drug will be approved by late 2013.

MERCK-Y WATER

Canaccord Genuity's Neil Maruoka, who rates Cardiome a
"hold", however, sees no near-term catalyst that's not already
priced in, and expects uncertainty around Merck's plans to keep
the pressure on Cardiome's stock.

Dundee Securities David Martin sees little chance of Merck
dropping development on the oral drug, but said any
discontinuation would negatively impact his forecasts and
valuation for the intravenous version.

"We're concerned about the magnitude of the downside
exposure if Merck discontinues vernakalant development," he
said.

Both analysts agreed that Cardiome's valuation hangs
largely on the oral vernakalant, given that patients suffering
from chronic AF present a bigger market opportunity than acute
AF attacks, which the intravenous version is aimed at.
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