Recently, the Cardiovascular and Renal Drugs Advisory Committee of the US Food and Drug Administration (FDA) issued a positive opinion and recommended the US approval of Bayer’s (BAYRY) blood-thinner Xarelto (rivaroxaban) for an additional indication. Bayer has co-developed the drug with Johnson & Johnson (JNJ).
Nine of the twelve panel members (with one abstention) recommended the approval of the blood-thinner for preventing stroke and systemic embolism in patients suffering from non-valvular atrial fibrillation (AF). AF refers to a cardiac rhythm disorder characterized by an erratic heartbeat.
We remind investors that Xarelto was cleared by the US regulatory body for the prevention of deep vein thrombosis (DVT) which may cause pulmonary embolism (PE) in patients undergoing knee or hip replacement surgery, earlier this year.While DVT refers to a blood clot in a deep vein and usually develops in the legs, PE refers to an obstruction of a blood vessel in the lungs, mostly because of a blood clot. The clot causes the blockage of a coronary artery.
However, the commercial opportunity represented by the indication is limited compared to the AF indication. Consequently, the positive opinion issued by the panel for the lucrative AF indication is highly encouraging for the co-developers.
A final decision from the US agency is expected by November 2011. Although the FDA is not bound to accept the recommendation of the advisory committee, it pays heed to the advisory committee’s recommendations while arriving at the final decision.
We note that the path for the US approval for Xarelto for the AF indication has not been smooth. Bayer and Johnson & Johnson failed to get Xarelto approved for the lucrative AF indication in 2009 and received a complete response letter (CRL) from the FDA. A response to the CRL was submitted in January this year. Clearance to market Xarelto in the US for preventing stroke in AF patients was sought on the basis of a pivotal, double-blind, late-stage study (ROCKET-AF: n=14,264).
On approval, Johnson & Johnson will market the drug in the US. Bayer will be exclusively responsible for the marketing of Xarelto in countries outside the US. Applications seeking marketing approval for Xarelto have also been filed in the European Union and Japan.
We believe that Xarelto’s approval for the AF indication would be a major boost to Bayer/ Johnson & Johnson’s top line since the candidate offers multi-billion dollar sales potential.
However, Xarelto would face intense competition in the anti-coagulant market. Xarelto will have to compete with Bristol-Myers/Pfizer’s (BMY/PFE) blood-thinner Eliquis, which was approved in the EU in May 2011. Moreover, the arrival of Boehringer Ingelheim’s Pradaxa has intensified competition in the market.
Our Recommendation
Currently, we have a Neutral stance on Bayer in the long run. The company carries a Zacks #3 Rank (Hold rating) in the short run. Our position is similar on Johnson & Johnson for the short and long-term.
