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  • 1. UPDATE AND BUY RECOMMENDATION U.S. Research: Pharmaceuticals January 24, 2011 CLINICAL DATA, INC. (NASDAQGM: CLDA) CLINICAL DATA STRIKES GOLD – WINS FDA APPROVAL FOR VIIBRYD™ (VILAZODONE) FOR TREATMENT OF MAJOR DEPRESSIVE DISORDEROn January 21, 2011, the FDA approved CLDA‟s vilazodone, a new antidepressant, as a first linetherapy for major depressive disorder (MDD). CLDA plans to market the new antidepressant underthe brand name Viibryd. This is a transformative event for CLDA as Viibryd should represent amajor new force in the antidepressant market, a market with $9.9 billion in drug sales in 2009. Wehad ascribed a high probability to an approval, and in our view, this de-risking event is likely totrigger 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. Closing Share Price (1/21/11) $15.03Clinical Data, Inc. (NasdaqGM: CLDA) is a pharmaceutical 52-Week Price Low / High $10.87 - $22.39company with one approved drug and a pipeline of late- and Mkt. Capitalization (issued) $450.2 MMearly-stage drugs in development. Shares Outstanding (issued) 29.96 MMApproved Drugs: 12-month Target Price $33.00 Est. Net Cash (1/13/11)* $42.1 MM Viibryd (vilazodone) for Major Depressive Disorder (MDD) Convertible Debt (9/30/10) $50.0 MMTherapeutic Pipeline: Fiscal Year Ends March 31st Website www.clda.comLate stage: *Est. net cash reported 1/12/11 in 8-K SEC filing Stedivaze™ Phase III ASPECT-1 Trial Underway; Second Product Peak Revenue NPV Phase III Trial in Advanced Planning (Cardiac Stress Viibryd (Vilazodone) $749 MM $616 MM Agent) Stedivaze™ $448 MM $398 MMSelected early stage: 12-Month Price Chart 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) Source: BigCharts.comWe are updating coverage on Clinical Data, Inc. (NasdaqGM: CLDA) with a BUY rating, and we arereiterating 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; CHRYSTYNA BEDRIJ KEITH A. MARKEY, PH.D. MARK MERRILL 212-509-9500 212-514-7914 646-442-1441 CBEDRIJ@GRIFFINSECURITIES.COM KMARKEY@GRIFFINSECURITIES.COM MMERRILL@GRIFFINSECURITIES.COMGriffin Securities, Inc., 17 State Street, NY, NY, 10004 www.GriffinSecurities.com 1 Please Review Disclosures on Page 17 of this Research Report
  • 2. Clinical Data, Inc. January 24, 2011 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 IIICLINICAL TRIALS:Stedivaze (apadenoson) is a selective A2A receptor agonist in development for use as a pharmacologicstress agent in myocardial perfusion imaging (MPI) scans, commonly called “cardiac stress tests”, used toidentify symptoms of coronary artery disease (CAD). Stedivaze is an extremely exciting agent and data todate suggests that the agent is well tolerated with an excellent safety profile, including no unexpectedincrease in side effects, including chest pains, shortness of breath, and flushing. Stedivaze is currently ina Phase III clinical trial (called the ASPECT-1 trial), which began in November 2009, and a second PhaseIII clinical trial is in the advanced planning stages. The two Phase III trials are expected to enrollapproximately 750 patients each over an 18–24 month period from trial initiation. The primary endpoint ofthe ASPECT-1 trial is non-inferiority to adenosine. Additionally, when Stedivaze Phase II data iscompared to Lexiscan Phase II data, it suggests that Stedivaze should be comparable to Lexiscan interms of efficacy, however Stedivaze should better Lexiscan’s side effect profile. We forecast annual peaksales 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 BUYRATING: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 $749million in CY2017) and Stedivaze NPV of $398 million (based on our base case estimates of peak salesof $448 million in CY2018. The company currently holds estimated net cash of $42.1 million to support itskey business initiatives. Together, with adjustments to calculate free cash flow, these two programs bythemselves, 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 pulmonaryarterial hypertension, 844 for the treatment of Asthma and/or Diabetes (option agreement for an exclusivelicense by Novartis), and 313 for ophthalmic diseases, including glaucoma (partnered with SantenPharmaceuticals).GRIFFIN SECURITIES EQUITY RESEARCH 2
  • 3. Clinical Data, Inc. January 24, 2011VIIBRYD™ (ANTIDEPRESSANT)Viibryd (vilazodone), a novel, dual-acting serotonergic antidepressant, is apotent and selective serotonin reuptake inhibitor, or SSRI, first line therapyfor major depressive disorder (MDD), and partial agonist of the 5-hydroxytryptamine 1a, or 5-HT1A, receptor. Viibryd was approved by theFDA on January 21, 2011, for use as a treatment option for majordepressive disorder. Viibryd completed two randomized, double-blind,placebo-controlled Phase III clinical trials and a 52-week long-term safetystudy. The primary endpoints and multiple secondary endpoints of each trialwere achieved with statistical significance related to depression asmeasured by the MADRS, HAM-D, and HAM-A scales. In addition, overalldropout rates were low. Viibryd’s approval was supported by data fromnearly 3,000 patients who have received the drug safely with a lowoccurrence of side effects. In addition, there was no significant difference between placebo and Viibryd interms of sexual dysfunction, as measured by validated scales (ASEX and CSFQ) showing numerical 1comparability to placebo. Given that treatment-emergence sexual dysfunction is a frequent adverse effectof most antidepressants and is one of the predominant reasons for premature drug discontinuation, theavailability of an antidepressant that does not cause sexual dysfunction is also a positive. We believe thatViibryd will represent a major force in the depression market, the fourth largest pharmaceutical market inthe U.S. with $9.9 billion in sales in 2009. We forecast peak annual sales of Viibryd reaching approximately$750 million.VIIBRYD: COMMERCIAL OUTLOOKBased on our internal assumptions and revenue model, we project peak revenue of $749 million inCY2017. Following FDA approval, we assume that Viibryd will be launched commercially in CY2011(FY2012). Figure 1 shows our projected sales for MDD in the U.S. Figure 1: Griffin Securities: Viibryd Revenue Forecast for MDD in the U.S. ($ in „000s) $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018ESource: Griffin Securities, Inc.The following revenue assumptions refer to our internal forecast for US sales of Viibryd in majordepressive disorder (MDD) only, excluding potential sales for GAD and/or other indications. The revenueassumptions 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.GRIFFIN SECURITIES EQUITY RESEARCH 3
  • 4. Clinical Data, Inc. January 24, 2011 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%Source: Griffin Securities, Inc.Key assumptions: 2 There are 211,000,000 antidepressant prescriptions written annually ; Approximately 60% of the antidepressant prescriptions written are written for the major depressive 3 disorder (MDD) indication ; 4 Viibryd penetrates the market beginning in FY2012 (CY2011) at a price of $114 per prescription ; 5 The price per prescription grows at an annual rate of 4% ; Viibryd penetrates 0.3% of the addressable market in launch year and reaches a peak penetration of 6 3% of the addressable market in FY2018 ; 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 brandedantidepressants with total number of prescriptions greater than 10 million in 2008 (Lexapro, Cymbalta, and Effexor) discounted witha 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.GRIFFIN SECURITIES EQUITY RESEARCH 4
  • 5. Clinical Data, Inc. January 24, 2011STEDIVAZE™ (PHARMACOLOGIC STRESS AGENT)Stedivaze (apadenoson), a selective A2A receptor agonist, is in clinicaldevelopment for use as a pharmacologic stress agent in myocardialperfusion imaging (MPI) scans. MPI scans, commonly called cardiac stresstests, are used to identify symptoms of coronary artery disease (CAD),including areas of poor blood flow in the heart caused by the formation ofatheromatous plaques. A pharmacologic stress agent is used to temporarilyincrease blood flow through coronary arteries during stress testing so arteryfunctionality can be accurately assessed. The A2A adenosine receptor is thereceptor subtype responsible for coronary vasodilation, or the widening of 7blood vessels. We believe that a pharmacologic stress agent likeStedivaze, with the potential for a reduced side-effect profile, would offer apotentially best in class option for diagnosing coronary artery disease in patients who cannot undergo anexercise test. Stedivaze has completed Phase II studies, and a Phase III study commenced in November2009.STEDIVAZE: PHASE III ASPECT-1 TRIAL UNDERWAYCLDA announced on November 18, 2009, that the first patient was enrolled in its initial Phase III clinicaltrial (ASPECT-1). The trial is a randomized, double blind, active control study that will enrollapproximately 750 patients over an 18 to 24 month time period. The Phase III trial will evaluate theefficacy of Stedivaze as a pharmacologic stress agent and compare its safety and tolerability to 8adenosine, a current standard option used for pharmacologic stress testing.Stedivaze Phase III ASPECT-1 Study DetailsDosing: Single bolus IV injection of 100 or 150 ugPatients: 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 withuse 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 5
  • 6. Clinical Data, Inc. January 24, 2011STEDIVAZE: COMMERCIAL OUTLOOKBased on our internal assumptions and revenue model, we project peak revenue of $523 million inCY2018 (FY2019). Figure 2 shows our projected Stedivaze sales. Figure 2: Griffin Securities: Stedivaze Revenue Forecast in the U.S. ($ in „000s) $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $- 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019ESource: Griffin Securities, Inc.The following revenue assumptions refer to US sales of Stedivaze as a pharmacologic stress agent foruse in MPI scans. The revenue assumptions exclude international sales or partnership or collaborationopportunities. Stedivaze™ (apadenoson): Cardiovascular Imaging Year penetration starts FY2015 Number of Procedures 4,200,000 Starting penetration rate 4.0% Percent addressable 100% 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%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 9,10 pharmacologic stress agent ; 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 11 annual rate of 3% from FY2015 through perpetuity ;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 apharmacologic stress agent.. Astellas press release, June 24, 2008, “Astellas Launches Lexiscan (Regadenoson) Injection for useas 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 annualgrowth rate of 10% will continue through 2014 as better agents (like selective A2A agonists) drive adoption of pharmacologic scansdo to improved AE profiles and ease of use. Additionally, our model does not take into account other modalities such as MRI andEcho which are likely to contribute to growth rates as switchover occurs. Finally, changing demographics, such as population agingand greater rates of obesity, are expected to contribute to overall growth in cardiovascular disease and related cardiovascularimaging market..GRIFFIN SECURITIES EQUITY RESEARCH 6
  • 7. Clinical Data, Inc. January 24, 2011 Stedivaze penetrates the market beginning in FY2015 at a price of $188 per vial growing 3% 12 annually ; 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 13 FY2018 and following the expiration of Lexiscan’s patent in FY2025 ; and 14 Stedivaze’s patent expires in FY2027. (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 mayeventually 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 Lexiscanwill cannibalize AdenoScan as both are marketed by Astellas. Third, Stedivaze has best-in-class attributes as compared toAdenoScan, Lexiscan, and CorVue because it is administered by bolus injection and it has an improved AE profile. Note Corvue’sfate is unclear given that the FDA panel voted against CorVue in October 2009, saying the data did not prove the drug was aseffective as adenosine. While Lexiscan and CorVue (if ever approved) are administered by bolus injection, they have comparableAE profiles to AdenoScan. Fourth, AdenoScan (adenosine) will only become generic in 2012 (although it should be largely replacedby Lexiscan). CorVue (if ever approved) will be generic in 2017, and Lexiscan will be generic in 2024; thus, we anticipate minimalgeneric competition until 2017. We also assume Lexiscan will have substantially cannibalized AdenoScan by the time a genericversion is available, and physicians will be hesitant to switch due to the reduced costs and ease of use associated with bolusdosing.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-yearextension from expiration in 2028). The model assumes the unit-dose patent will provide protection through 2026.GRIFFIN SECURITIES EQUITY RESEARCH 7
  • 8. Clinical Data, Inc. January 24, 2011OTHER 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 8
  • 9. Clinical Data, Inc. January 24, 2011INVESTMENT CONCERNS AND RISKSFor a complete description of risks and uncertainties related to Clinical Data, Inc.‟s business, seethe “Risk Factors” section in Clinical Data‟s SEC filings, which can be accessed directly from theSEC 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 9
  • 10. Clinical Data, Inc. January 24, 2011FINANCIAL FORECASTS & VALUATIONThe following assumptions refer to CLDA’s revenue model, annual earnings model, and valuationanalysis. The revenue estimates are for Viibryd sales revenue in the US (excluding revenue frominternational sales or partnership or collaboration opportunities in the US or internationally) and Stedivazesales revenue in the US (excluding revenue from international sales or partnership or collaborationopportunities in the US or internationally). We have also not included potential upfront fees or milestonerevenue from, nor expenses associated with, CLDA’s early stage product candidates. Given that weexpect CLDA to seek partnerships and/or monetize some of these assets, we treat these products asvaluation-neutral to our model.HISTORICAL BALANCE SHEET$ in thousands, except per share dataFY ending March 31ASSETS 30-Sep-10 31-Mar-10Current 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 $ 98,955LIABILITIES AND STOCKHOLDERS EQUITYCurrent 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 37,388Long-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 57,674Stockholders 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 $ 98,955GRIFFIN SECURITIES EQUITY RESEARCH 10
  • 11. Clinical Data, Inc. January 24, 2011REVENUE ASSUMPTIONSThe 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 ofStedivaze. The revenue assumptions exclude international sales and/or partnership or collaborationopportunities in the US or international markets. 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%Viibryd Assumptions: 15 There are 211,000,000 antidepressant prescriptions written annually ; Approximately 60% of the antidepressant prescriptions written are written for the major depressive 16 disorder (MDD) indication ; 17 Viibryd penetrates the market beginning in FY2012 (CY2011) at a price of $114 per prescription ; 18 The price per prescription grows at an annual rate of 4% ; Viibryd penetrates 0.3% of the addressable market in launch year and reaches a peak penetration of 19 3% of the addressable market in FY2018 ; and The Viibryd patent expires in FY2020. Stedivaze™ (apadenoson): Cardiovascular Imaging Year penetration starts FY2015 Number of Procedures 4,200,000 Starting penetration rate 4.0% Percent addressable 100% 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%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 20,21 pharmacologic stress agent ; 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 brandedantidepressants with total number of prescriptions greater than 10 million in 2008 (Lexapro, Cymbalta, and Effexor) discounted witha 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 apharmacologic stress agent.. Astellas press release, June 24, 2008, “Astellas Launches Lexiscan (Regadenoson) Injection for useas a Pharmacologic Stress Agent in Radionuclide Myocardial Perfusion Imaging (MPI).”GRIFFIN SECURITIES EQUITY RESEARCH 11
  • 12. Clinical Data, Inc. January 24, 2011 The addressable market will grow at an annual rate of 10% from FY2010 through FY2015 and an 22 annual rate of 3% from FY2015 through perpetuity ; Stedivaze penetrates the market beginning in FY2015 at a price of $188 per vial growing 3% 23 annually ; 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 24 FY2018 and following the expiration of Lexiscan’s patent in FY2025 ; and 25 Stedivaze’s patent expires in FY2027. (Intentionally left blank)22 According to AMR data, the compounded annual growth rate of pharmacologic MPIs since 1996 is 11.6%. We assume an annualgrowth rate of 10% will continue through 2014 as better agents (like selective A2A agonists) drive adoption of pharmacologic scansdo to improved AE profiles and ease of use. Additionally, our model does not take into account other modalities such as MRI andEcho which are likely to contribute to growth rates as switchover occurs. Finally, changing demographics, such as population agingand greater rates of obesity, are expected to contribute to overall growth in cardiovascular disease and related cardiovascularimaging 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 mayeventually 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 Lexiscanwill cannibalize AdenoScan as both are marketed by Astellas. Third, Stedivaze has best-in-class attributes as compared toAdenoScan, Lexiscan, and CorVue because it is administered by bolus injection and it has an improved AE profile. Note Corvue’sfate is unclear given that the FDA panel voted against CorVue in October 2009, saying the data did not prove the drug was aseffective as adenosine. While Lexiscan and CorVue (if ever approved) are administered by bolus injection, they have comparableAE profiles to AdenoScan. Fourth, AdenoScan (adenosine) will only become generic in 2012 (although it should be largely replacedby Lexiscan). CorVue (if ever approved) will be generic in 2017, and Lexiscan will be generic in 2024; thus, we anticipate minimalgeneric competition until 2017. We also assume Lexiscan will have substantially cannibalized AdenoScan by the time a genericversion is available, and physicians will be hesitant to switch due to the reduced costs and ease of use associated with bolusdosing.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-yearextension from expiration in 2028). The model assumes the unit-dose patent will provide protection through 2026.GRIFFIN SECURITIES EQUITY RESEARCH 12
  • 13. Clinical Data, Inc. January 24, 2011CASHFLOW MODELViibryd $ in thousands 2010A 2011E 2012E 2013E 2014E 2015ERevenue Drug Sales - - 52,569 167,297 354,938 502,024 Milestones - - - - - -Total Revenue $ - $ - $ 52,569 $ 167,297 $ 354,938 $ 502,024COGS - - 4,731 15,057 31,944 45,182 % Margin 0% 0% 9% 9% 9% 9%Merck Royalties 10% 10% 10% 10% 10% 10% - - 5,257 16,730 35,494 50,202Gross Profit $ - $ - $ 42,581 $ 135,511 $ 287,499 $ 406,639 % Margin 0% 0% 81% 81% 81% 81%Operating Expenses S&M 1,212 35,000 120,000 125,000 130,000 133,209 % of Revenue 0% 0% 228% 75% 37% 27% R&D 30,900 2,000 5,000 10,000 10,000 10,000 % of Revenue 0% 0% 10% 6% 3% 2% G&A 1,500 3,000 3,500 4,000 4,500 5,000 % of Revenue 0% 0% 7% 2% 1% 1%Operating Profit $ (33,612) $ (40,000) $ (85,919) $ (3,489) $ 142,999 $ 258,430 % Margin 0% 0% -163% -2% 40% 51% Taxes - - - (1,326) 54,340 98,203Post-Tax Profit $ (33,612) $ (40,000) $ (85,919) $ (2,163) $ 88,660 $ 160,226Assumptions: 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.GRIFFIN SECURITIES EQUITY RESEARCH 13
  • 14. Clinical Data, Inc. January 24, 2011Stedivaze $ in thousands 2010A 2011E 2012E 2013E 2014E 2015E Revenue Drug Sales - - - - - 66,404 Milestones - - - - - - Total Revenue $ - $ - $ - $ - $ - $ 66,404 COGS - - - - - 1,328 % Margin 0% 0% 0% 0% 0% 2% Royalties to UVA 5% 5% 5% 5% 5% 5% - - - - - 3,320 Milestones to ATG - - - 5,000 10,000 Gross Profit $ - $ - $ - $ - $ (5,000) $ 51,756 % Margin 0% 0% 0% 0% 0% 78% Operating Expenses S&M - - - - 4,633 20,000 % of Revenue 0% 0% 0% 0% 0% 30% R&D 5,800 28,000 25,000 15,000 2,000 1,000 % of Revenue 0% 0% 0% 0% 0% 2% G&A 500 500 1,000 1,500 3,000 6,000 % of Revenue 0% 0% 0% 0% 0% 9% Operating Profit $ (6,300) $ (28,500) $ (26,000) $ (16,500) $ (14,633) $ 24,756 % Margin 0% 0% 0% 0% 0% 37% Taxes - - - - - 9,407 Post-Tax Profit $ (6,300) $ (28,500) $ (26,000) $ (16,500) $ (14,633) $ 15,349Assumptions: 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 26 distribution, $1.75 per vial for warehousing, and $1.50 per vial for manufacturing; 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 $1 million in FY2015 through perpetuity. These assumptions include expenses for two pivotal Phase III trials of Stedivaze, two Phase I feasibility studies in patients with asthma and COPD, as well as various other small proof-of-concept-studies.26 Favorable COGS are driven by the potency of apadenoson (Stedivaze). On average, each dose contains approximately 125 μg ofapadenoson active pharmaceutical ingredient (API); thus, one gram of apadenoson API should yield approximately 8000 doses.GRIFFIN SECURITIES EQUITY RESEARCH 14
  • 15. Clinical Data, Inc. January 24, 2011INCOME STATEMENTFY ending March 31 2011 2012 2013 2014 2015($ in thousands, except per share data) 2011 2012 2013 2014 2015Total revenue $ 12,000 $ 52,569 $ 167,297 $ 354,938 $ 568,428 COGS 5,500 4,731 15,057 31,944 46,510Gross profit $ 6,500 $ 47,838 $ 152,240 $ 322,993 $ 521,918Operating expenses R&D 43,200 40,000 20,000 12,000 11,000 SG&A 40,000 124,500 130,500 142,133 164,209 - - - - - Total expense 83,200 164,500 150,500 154,133 175,209Operating profit $ (76,700) $ (116,662) $ 1,740 $ 168,860 $ 346,709Non-operating income/expense Interest expense (10,392) (13,721) (12,132) (9,860) (9,860) Interest income - - - - - Other 200 250 300 350 400 Total non-operating (10,192) (13,471) (11,832) (9,510) (9,460)Pretax profit $ (86,892) $ (130,133) $ (10,092) $ 159,350 $ 337,249 Income tax - - - 60,553 128,154Net income $ (86,892) $ (130,133) $ (10,092) $ 98,797 $ 209,094 Earnings (loss) per share $ (2.90) $ (4.04) $ (0.30) $ 2.89 $ 6.11 Diluted shares outstanding 44,334 46,584 48,584 48,584 48,584Income Statement Assumptions: 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.GRIFFIN SECURITIES EQUITY RESEARCH 15
  • 16. Clinical Data, Inc. January 24, 2011DISCOUNTED CASH FLOW (DCF) MODELOur DCF model, using a discount rate of 12.5%, suggests a value of $33.04 for CLDA shares.FY ending March 31 2011 2012 2013 2014 2015($ in thousands, except per share data) 2011 2012 2013 2014 2015Revenue $ 12,000 $ 52,569 $ 167,297 $ 354,938 $ 568,428Operating income (76,700) (116,662) 1,740 168,860 346,709Net income (86,892) (130,133) (10,092) 98,797 209,094Depreciation/amortization 3,200 3,200 3,200 3,200 3,200Stock-based compensation 8,000 8,500 9,000 9,500 10,000Tax loss carryforwards - - - 128,154 195,028Capital expenditures (500) (750) (1,000) (1,250) (1,500)Asset purchases - - - - -Other - - - - - Total cash flow adjustments 10,700 10,950 11,200 139,604 206,728Free cash flow $ (76,192) $ (119,183) $ 1,108 $ 238,402 $ 415,822 PV of Terminal Value at a Discounted Cash Flows Perpetual growth rate of rFCF Enterprise ValueDiscount Rate (2008 - 2023) 2.0% 3.0% 4.0% 2.0% 3.0% 4.0% 7.5% $ 2,087,531 $ 791,420 $ 976,775 $ 1,268,046 $ 2,878,951 $ 3,064,306 $ 3,355,577 10.0% $ 1,696,980 $ 385,404 $ 444,780 $ 523,948 $ 2,082,384 $ 2,141,760 $ 2,220,928 12.5% $ 1,389,158 $ 209,614 $ 233,950 $ 264,012 $ 1,598,772 $ 1,623,108 $ 1,653,170 15.0% $ 1,144,267 $ 121,755 $ 133,194 $ 146,713 $ 1,266,022 $ 1,277,461 $ 1,290,980 17.5% $ 947,738 $ 73,960 $ 79,836 $ 86,582 $ 1,021,698 $ 1,027,574 $ 1,034,320 Total Equity Value Value per Diluted ShareDiscount Rate Net Debt 2.0% 3.0% 4.0% 2.0% 3.0% 4.0% 7.5% $ 17,888 $ 2,861,063 $ 3,064,306 $ 3,337,689 $ 58.89 $ 63.07 $ 68.70 10.0% $ 17,888 $ 2,064,496 $ 2,123,872 $ 2,203,040 $ 42.49 $ 43.72 $ 45.34 12.5% $ 17,888 $ 1,580,884 $ 1,605,220 $ 1,635,282 $ 32.54 $ 33.04 $ 33.66 15.0% $ 17,888 $ 1,248,134 $ 1,259,573 $ 1,273,092 $ 25.69 $ 25.93 $ 26.20 17.5% $ 17,888 $ 1,003,810 $ 1,009,686 $ 1,016,432 $ 20.66 $ 20.78 $ 20.92 Terminal Value as % Enterprise Value Implied EBITDA MultipleDiscount Rate 2.0% 3.0% 4.0% 2.0% 3.0% 4.0% 7.5% 27.5% 31.9% 37.8% 12.52 15.45 20.06 10.0% 18.5% 20.8% 23.6% 8.61 9.93 11.70 12.5% 13.1% 14.4% 16.0% 6.56 7.32 8.26 15.0% 9.6% 10.4% 11.4% 5.30 5.79 6.38 17.5% 7.2% 7.8% 8.4% 4.44 4.80 5.20GRIFFIN SECURITIES EQUITY RESEARCH 16
  • 17. Clinical Data, Inc. January 24, 2011DISCLOSURESANALYST(s) CERTIFICATION: The analyst(s) responsible for covering the securities in this report certify that theviews expressed in this research report accurately reflect their personal views about Clinical Data, Inc. (the“Company”) and its securities. The analyst(s) responsible for covering the securities in this report certify that no partof their compensation was, is, or will be directly or indirectly related to the specific recommendation or view containedin this research report.MEANINGS OF RATINGS: Our rating system is based upon 12 to 36 month price targets. BUY describes stocksthat we expect to appreciate by more than 20%. HOLD describes stocks that we expect to change plus or minus20%. SELL describes stocks that we expect to decline by more than 20%. SC describes stocks that Griffin Securitieshas Suspended Coverage of this Company and price target, if any, for this stock, because it does not currently havea sufficient basis for determining a rating or target and/or Griffin Securities is redirecting its research resources. Theprevious investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon.NR describes stocks that are Not Rated, indicating that Griffin Securities does not cover or rate this Company.DISTRIBUTION OF RATINGS: Currently Griffin Securities has assigned BUY ratings on 96.6% of companies itcovers, HOLD ratings on 3.4%, and SELL ratings on 0.0%. Griffin Securities has provided investment bankingservices for 17% of companies in which it has had BUY ratings in the past 12 months and 0% for companies in whichit has had HOLD, NR, or no coverage in the past 12 months or has suspended coverage (SC) in the past 12 months.MARKET MAKING: Griffin Securities does not maintain a market in the shares of this Company or any otherCompany mentioned in the report.COMPENSATION OR SECURITIES OWNERSHIP: The analyst(s) responsible for covering the securities in thisreport receive compensation based upon, among other factors, the overall profitability of Griffin Securities, includingprofits derived from investment banking revenue. The analyst(s) that prepared the research report did not receive anycompensation from the Company or any other companies mentioned in this report in connection with the preparationof this report. The analysts responsible for covering the securities in this report currently do not own common stock inthe Company, but in the future may from time to time engage in transactions with respect to the Company or othercompanies mentioned in the report. Griffin Securities from time to time in the future may request expenses to be paidfor copying, printing, mailing and distribution of the report by the Company and other companies mentioned in thisreport. Griffin Securities has received compensation from the Company in the past 12 months for investment banking-related services. Griffin Securities expects to receive, or intends to seek, compensation for investment bankingservices from the Company in the next three months.PRICE CHART BUY BUY BUY BUY BUY BUYSource: BigCharts.com3/05/2007 – Initiating Coverage: share price: $13.82; rating: BUY; 12-month price target: $23.00 (adjusted for 3:2stock split); 12/21/2007 – Research Update: share price: $22.63; rating: BUY; 12-month price target: $45.00;7/23/2008 – Research Update: share price: $16.13; rating: BUY; 12-month price target: $45.00; 8/06/2008 –Research Update: share price: $17.43; rating: BUY; 12-month price target: $52.00; 6/22/2009 – Research Update:share price: $12.30; rating: BUY; 12-month price target: $38.00. 11/25/2009 – Research Update: share price: $15.96;rating: BUY; 12-month price target: $38.00. 10/1/2010 – Research Update: share price: $16.87; rating: BUY; 12-month price target: $33.00. 1/24/2011 – Research Update: share price (1/21/11 close): $15.03; rating: BUY; 12-month price target: $33.00.GRIFFIN SECURITIES EQUITY RESEARCH 17
  • 18. Clinical Data, Inc. January 24, 2011FORWARD-LOOKING STATEMENTS: This Report contains forward-looking statements, which involve risks anduncertainties. Actual results may differ significantly from such forward-looking statements. Factors that might causesuch a difference include, but are not limited to, those discussed in the “Risk Factors” section in the SEC filingsavailable in electronic format through SEC Edgar filings at www.SEC.gov on the Internet.GENERAL: Griffin Securities, Inc. (“Griffin Securities”) a FINRA member firm with its principal office in New York,New York, USA is an investment banking firm providing corporate finance, merger and acquisitions, brokerage, andinvestment opportunities for institutional, corporate, and private clients. The analyst(s) are employed by GriffinSecurities. Our research professionals provide important input into our investment banking and other businessselection processes. Our salespeople, traders, and other professionals may provide oral or written marketcommentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressedherein, and our proprietary trading and investing businesses may make investment decisions that are inconsistentwith the recommendations expressed herein.Griffin Securities may from time to time perform corporate finance or other services for some companies describedherein and may occasionally possess material, nonpublic information regarding such companies. This information isnot used in preparation of the opinions and estimates herein. While the information contained in this report and theopinions contained herein are based on sources believed to be reliable, Griffin Securities has not independentlyverified the facts, assumptions and estimates contained in this report. Accordingly, no representation or warranty,express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness orcorrectness of the information and opinions contained in this report.The information contained herein is not a complete analysis of every material fact in respect to any company, industryor security. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security inany jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on thismaterial. It is for the general information of clients of Griffin Securities. It does not take into account the particularinvestment objectives, financial situations, or needs of individual clients. Before acting on any advice orrecommendation in this material, clients should consider whether it is suitable for their particular circumstances and, ifnecessary, seek professional advice. Certain transactions - including those involving futures, options, and otherderivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for allinvestors. The material is based on information that we consider reliable, but we do not represent that it is accurate orcomplete, and it should not be relied on as such. The information contained in this report is subject to change withoutnotice and Griffin Securities assumes no responsibility to update the report. In addition, regulatory, compliance, orother reasons may prevent us from providing updates.DISCLOSURES FOR OTHER COMPANIES MENTIONED IN THIS REPORT: To obtain applicable currentdisclosures in electronic format for the subject companies in this report, please refer to SEC Edgar filings atwww.SEC.gov. In particular, for a description of risks and uncertainties related to subject companies’ businesses inthis report, see the “Risk Factors” section in the SEC filings.GRIFFIN SECURITIES EQUITY RESEARCH 18

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