NASDAQ:CVKD
READ THE FULL CVKD RESEARCH REPORT
We are initiating coverage of Cadrenal Therapeutics, Inc. (NASDAQ:CVKD) with a $30.00 valuation. Cadrenal is a biopharmaceutical developing innovative therapies for life-threatening cardiovascular and renal diseases. The company’s lead development candidate, tecarfarin, is a late-stage novel oral and reversible anticoagulant intended to prevent heart attacks, stroke, and death due to blood clots in patients suffering from rare cardiovascular conditions requiring chronic anticoagulation. These conditions include patients with left ventricular assist devices (LVADs), patients with end-stage kidney disease (ESKD) and atrial fibrillation (AFib), and patients with mechanical heart valves with difficult-to-control time in therapeutic range (TTR). While treatment guidelines currently advise patients with these conditions to use a vitamin K antagonist (VKA), such as warfarin, no randomized controlled trials have shown that warfarin or direct-acting oral anticoagulants (DOACs) like Eliquis and Xarelto have any clinical benefit in these patient populations. Thus, a novel VKA such as tecarfarin could gain significant market share upon approval in those indications.
Solving Warfarin’s Major Problems – Warfarin is a VKA treatment option that has been used for thrombosis since the 1950’s. However, there are many adverse events associated with its use, including hospitalizations from bleeding and clotting along with skin necrosis and hair loss. In addition, there are many drug-drug interactions due to its metabolic profile. Tecarfarin is a VKA that was designed to solve the warfarin metabolism problem and is also not impacted by kidney function.
Metabolic Advantage Sets Tecarfarin Apart – Tecarfarin is metabolized via an alternative pathway (Carboxylesterase 2, CES2) that is abundant and essentially unsaturable. Warfarin is metabolized by seven different CYP450 isoenzymes, with approximately 30% of the population harboring genetic variants of CYP2C9 that alters warfarin metabolism. In addition, warfarin metabolism is further complicated by inhibitors and inducers of CYP450 enzymes that directly impact its activity.
Phase 3 Ready Asset – Cadrenal has designed a randomized, single blind, Phase 3, multicenter study to evaluate tecarfarin compared to warfarin in patients with LVADs. The final protocol will be announced following discussions with the FDA in Fall 2024.
ODD for LVADs and ESKD+AFib – The U.S. Food and Drug Administration (FDA) granted Orphan Drug Designation (ODD) to tecarfarin for the prevention of thrombosis in patients with LVADs and ODD and Fast Track status to tecarfarin for the prevention of systemic thromboembolism of cardiac patients with ESKD and AFib. ODD provides an approved drug with a seven-year period of U.S. marketing exclusivity along with other benefits and incentives. Fast Track is designed to facilitate the development and expedite the review of drugs to treat serious conditions and fill an unmet medical need and could result in priority review of the New Drug Application (NDA).
Valuation
We value Cadrenal using a probability-adjusted discounted cash flow model that takes into account potential future revenues of tecarfarin in LVADs and ESKD + AFib. While not currently a part of the model, we note the company does have plans to pursue tecarfarin in patients with mechanical heart valves with difficult-to-control TTR and represents potential upside to our valuation. For all indications, we model for Cadrenal to enter into a commercialization partnership and receive a 13% royalty on net sales.
For LVADs, we estimate a patient population of approximately 15,000 in the U.S. According to the LVAD guidelines, patients are advised to be on continual anticoagulation therapy. We estimate that if approved, tecarfarin would eventually be utilized by the majority of patients. Following a Phase 3 initiation in 2025, we model for approval in 2028 and peak sales of approximately $900 million seven years after approval. Using a 60% probability of approval and a 15% discount rate leads to a net present value for tecarfarin in LVADs of $69 million.
For ESKD + AFib, we estimate there are approximately 100,000 individuals in the U.S. with ESKD and AFib. As of now, there is no clinical evidence to support the use of any drug for the prevention of thromboembolic events in this patient population, thus positive results in a Phase 3 trial could lead to substantial market share. We model for approval in 2029 and peak sales of approximately $600 million. Using a 50% probability of approval and a 15% discount rate leads to a net present value for tecarfarin in ESKD + AFib of $36 million.
Combining the net present value for tecarfarin in those two indications with the current cash ($5 million) and the potential cash from warrant exercises (approximately $9 million) leads to a net present value for Cadrenal of $106 million. Dividing by the diluted share count (approximately 1.5 million) plus an additional 2.0 million shares to account for additional financing leads to a valuation of $30 per share.
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