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The Zacks Analyst Blog Highlights: Bayer, Novartis, Pfizer, Eli Lilly and Unilever

Zacks Equity Research

For Immediate Release

Chicago, IL – March 1, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Bayer (BAYRY), Novartis (NVS), Pfizer (PFE), Eli Lilly and Company (LLY) and Unilever Plc (UL).

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Here are highlights from Thursday’s Analyst Blog:

Priority Review for Bayer Drug

Bayer’s (BAYRY) Healthcare unit recently announced that its oncology candidate regorafenib, was granted priority review by the Japanese Ministry of Health, Labour and Welfare (:MHLW) for the treatment of patients suffering from unresectable and/or metastatic gastrointestinal stromal tumors (:GIST).

In Dec 2012, Bayer Yakuhin Ltd., Bayer’s Japanese subsidiary, submitted a marketing authorization application for regorafenib to the MHLW in Japan. The company had earlier submitted a marketing application for the candidate in Japan for the treatment of colorectal cancer (CRC) and had received priority review in Aug 2012.

Bayer is seeking approval of the candidate on the basis of data from a phase III study (GRID: n=199), which evaluated patients suffering from metastatic and/or unresectable gastrointestinal stromal tumors. The disease had progressed in the evaluated patients in spite of being previously treated with Novartis’ (NVS) Gleevec and Pfizer’s (PFE) Sutent.

Regorafenib is already available in the US, under the brand name of Stivarga, for treating patients suffering from metastatic colorectal cancer (mCRC), whose disease had progressed even after treatment with standard drugs prescribed for the disease. A couple of days back, Stivarga was approved for the GIST indication as well in the US. Stivarga’s label for the GIST indication in the US carries a boxed warning citing the risk of hepatotoxicity.

Bayer is also seeking EU approval of regorafenib for the treatment of mCRC.

Bayer, a large cap pharma company, currently carries a Zacks Rank #2 (Buy). Another large cap pharma stock Eli Lilly and Company (LLY) also carries a comparable rank.

Unilever Downgraded to Neutral

On Feb 27, we revert back to a Neutral rating on fast moving consumer goods giant Unilever Plc (UL) from Outperform due to sluggish spread sales volume and persistent macroeconomic headwinds despite reporting healthy fourth quarter results.

Why Back to Neutral?

Estimates for Unilever have been declining ever since it reported its fourth quarter results on Jan 23. Despite the impressive results in the fourth quarter, estimates have declined due to a decline in the spread sales volume and an uncertain macro-economic environment, going forward.

The company has delivered weak sales in its spreads business from last few quarters. The company has also recently closed its spreads manufacturing plant in Atlanta, due to sluggish spreads business.

In addition, the macro-economic environment of developed nations has saturated and is experiencing sluggish growth. Unilever is thus reducing its presence in the developed markets, as these markets are generating disappointing volumes.

Moreover, debt crisis in Europe and ongoing economic challenges along with austerity measures taken by the European government can badly impact the company’s European supply chain and the operations of the company.

The company also faces significant commodity cost headwinds that is crippling its margins since last many quarters. The company’s exposure to international markets also invites unfavorable foreign currency translations, which remain a significant overhang.

Following the release of fourth quarter results, the Zacks Consensus Estimate for 2013 has gone down 2.5% to $2.31 per share. The Zacks Consensus Estimate for 2014 has also declined 3.9% to $2.47 per share. With the Zacks Consensus Estimates for both 2013 and 2014 going down, the company now has a Zacks Rank #4 (Sell).


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