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Novartis Provides R&D Update

Zacks Equity Research

Swiss pharmaceutical giant Novartis (NVS) recently provided an update on its pipeline candidates. The company also discussed its commercialization plans for these candidates so as to drive growth through 2017.

Novartis’ pharmaceutical division currently has 139 projects in clinical development of which 73 are New Molecular Entities (NMEs) covering several disease areas.

Boasting 56 approvals since 2007 in the US, Europe, Japan and China, Novartis undisputedly is one of the leading players in the pharmaceutical industry. To date, the company received 9 approvals or positive recommendations this year.

The company is expecting several data read-outs, filings and regulatory decisions in the next two years. In the next one year, Novartis is expecting data read outs from 13 pivotal studies along with 9 filings and 7 regulatory decisions. The following year will see 11 pivotal trial read-outs, 11 filings and 10 regulatory decisions.

Novartis’ oncology portfolio also performed well year to date with 6 indications including 2 NMEs getting approved. The company is expecting further growth in this area over the next five years. Afinitor, one of the leading growth drivers in the oncology segment, is expected to exceed sales of $2 billion in breast cancer alone by 2017.

We note that Afinitor is approved in five indications including breast cancer. Moreover the scheduled product launches and launches of pipeline projects are expected to contribute another $1 billion by 2017.

The company already has given a new dimension to the Ph+ chronic myeloid leukemia (:CML) area. Novartis’ Tasigna, a potent 2nd generation targeted therapy for CML, has shown reduced risk of progression and deeper and more sustained molecular response in comparison to Glivec. The company is planning additional clinical trials on Tasigna next year.

However, Novartis recently announced mixed data from a phase III study of its acute heart failure (:AHF) candidate RLX030 (serelaxin). Though the company expects to initiate regulatory findings in early 2013 in the US and the EU, we believe the company may need to conduct an additional study depending on the label.

Meanwhile, Novartis announced positive results from a phase II study of LCZ696, which showed significant reduction in a key indicator of morbidity and mortality in patients suffering from chronic heart failure with preserved ejection fraction (HF-PEF). The heart failure market currently has players like Takeda Pharmaceutical Company Limited (TKPYY) and Merck & Co (MRK).

Novartis will also be focusing on areas like chronic obstructive pulmonary disease (:COPD), psoriasis, ankylosing spondylitis, rheumatoid arthritis and multiple sclerosis.

The company will be looking to increase its efficiency and productivity without increasing costs. Novartis intends to introduce novel technologies and methods to reduce recruitment time and trial costs along with improving study quality and patient comfort and safety.

Currently, we have a Neutral recommendation on Novartis. Novartis carries a Zacks #3 Rank (Hold rating) in the short run.

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