Novartis, Regeneron Shares Advance To New Highs On Updated Drug News

Investor's Business Daily

Wall Street rewarded Novartis and Regeneron Tuesday for presentations at a cardiology conference over the weekend, with Novartis' heart-failure drug hailed as a potential game-changer. At the European Society of Cardiology (ESC) Congress in Barcelona, Novartis (NVS) revealed results of a phase three trial of patients suffering heart failure with reduced ejection fraction. (Ejection fraction is a measure of how much blood a heart pumps.) Some patients took Novartis' experimental LCZ696 and others the standard ACE inhibitor enalapril. LCZ696 cut heart-failure-related deaths by 20% and HF-related hospitalization by 21%.

The overall death rate for the LCZ696 group was 16% lower than that of the enalapril group.

That last item is especially important, Novartis Global Head of Development Operations Patrice Matchaba tells IBD, since LCZ696 is unlike existing drugs.

"This is an elderly population — average age was 63 years old," said Matchaba. "Sometimes you can decrease cardiovascular death, but in that population (you) may increase another cause of death, if you have a side effect in a drug from a mechanism that is new.

Drug Sales Estimates Climb

Novartis says that it plans to file for U.S. approval of the drug by year-end and EU approval early next year.

Wall Street's annual sales estimate for the drug is $1.3 billion in 2020, but it's starting to go up. Leerink's Seamus Fernandez, already above his peers with a $3.2 billion peak estimate, on Monday hiked his forecast to $6.4 billion. He lifted his price target on Novartis stock to 111 from 104.

"Feedback from the presenters, discussants and the trial panel . .. was among the most bullish we've heard in years," Fernandez wrote in his research note. "KOLs (key opinion leaders) at ESC were actively suggesting that colleagues switch patients from ACE/ARBs to LCZ696 upon availability and reimbursement. One KOL not affiliated with the trial or NVS called the trial a 'game changer.'

Morningstar analyst Damien Conover also lifted his estimate to around $6 billion from just over $1 billion. Sanford C. Bernstein analyst Timothy Anderson estimates that annual sales could go as high as $8 billion.

The Street knew that the trial would be a success in March, when Novartis stopped the trial early because it already hit its endpoints. But Conover says that because heart-failure research has been in the doldrums, "they were hesitant to put big es timates" on cardiovascular drugs.

Patients with reduced ejection fraction are half of the 26 million heart-failure patients in the U.S. and Europe. The other half have preserved ejection fraction, for which there is no approved therapy, says Matchaba. Novartis recently completed a phase two study of LCZ696 in the latter group that showed only a modest benefit, says Conover.

He notes that the study had only 300 patients, whereas its ongoing phase three trial has some 4,300 patients, which should give a clearer picture of its benefit.

Novartis' stock rose more than 4% to 93.70, hitting a new high.

At the onference, Regeneron Pharmaceuticals (REGN) and its pharma partner Sanofi (SNY) released more details on their phase three study of alirocumab, a PCSK9 inhibitor designed to lower LDL cholesterol. (PCSK9 regulates cholesterol in blood.) The results, showing that the twice-monthly injections kept patients' cholesterol down after a year, didn't surprise Wall Street.

Shift From Statins?

Leerink conducted a survey of 100 physicians that implied better business than expected for the entire PCSK9 class.

The doctors said that 21% of their patients on statins — currently the standard treatment for high cholesterol — still had too-high LDL. An additional 11% were statin-intolerant.

They expected about 40% of both groups would go on PCSK9 drugs, implying peak annual sales of $10.9 billion for the class.

Leerink estimates that alirocumab and Amgen's (AMGN) evolocumab will split about 80% of the market, since they'll hit the market first and at roughly the same time. On Tuesday, in fact, Amgen submitted evolocumab for approval in the EU after filing with the FDA last week.

Leerink analysts raised their price targets on Amgen and Regeneron. But while Regeneron rose nearly 3% to 359.50 after hitting a record 369.31 intraday, Amgen slid 1% to 137.96. Analyst Conover didn't see a good reason for this, but suggested that Regeneron was doing better PR.

"Sanofi and Regeneron are doing a really good job getting their information out, hosting an investor call, getting things fired up," he said. "That sometimes drives more interest.

Sanofi shares rose less than 1%.

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