Novartis AG's New Medicine Approval Looks Interesting

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 |  About: Novartis AG (NVS)
by: StockBaller

Novartis AG (NYSE:NVS) is a massive global healthcare company with numerous subsidiaries. The most interesting recent news concerning NVS is that eye care company Alcon (a subsidiary of NVS) has announced that the US Food and Drug Administration (FDA) has approved Simbrinza Suspension, a medicine designed to reduce elevated intraocular pressure (IOP) in patients with primary open-angle glaucoma or ocular hypertension. Regarding the development, Robert Warner of Alcon commented as follows:

The introduction of Simbrinza further expands our ability to provide effective treatments for patients with elevated IOP. Given its excellent efficacy, established safety profile, and the fact that it is the only available, fixed-dose combination without a beta blocker approved in the US, Simbrinza has the potential to re-shape the treatment paradigm for glaucoma.

What Is The Significance Of Simbrinza Suspension?

First, we need to take a look at what this new medicine (Simbrinza Suspension) treats. Glaucoma is a condition that causes damage to the eye's optic nerve, and is associated with a buildup of pressure over time. The condition tends to get worse over time and can cause permanent loss of vision. Unfortunately, glaucoma is very common, especially open-angle glaucoma where the structure of the eye appears normal but fluid does not flow properly through the drain of the eye. According to the Glaucoma Research Foundation, over 2.2 million Americans have glaucoma, but only half know they have it. And of the 2.2 million Americans with glaucoma, 120,000 people are blind from Glaucoma. Worldwide, 67 million people have glaucoma, and it's the second most common cause of preventable blindness.

While there are many cases of glaucoma, we are still yet to have a proper cure, though there are plenty of medicines for it out there that may be effective to varying degrees. As elevated IOP is the only modifiable risk factor for glaucoma, the majority of treatments for glaucoma are designed to lower or control IOP. Some of the main types of Glaucoma eye drops are as follows:

  • Prostaglandins - these are eye drops that are required only once a day, and work by relaxing muscles in the eye and allowing a better flow of fluids. Well known FDA-approved prostaglandins include Xalatan from Pfizer (NYSE:PFE), Lumigan from Allergan (NYSE:AGN), Travatan Z from Alcon (just like Simbrinza Suspension) and Rescula from Novartis AG.
  • Beta Blockers - these were once the most common drugs for treating glaucoma. Examples include Timoptic XE from Merck (NYSE:MRK), Instalol from ISTA Pharmaceuticals (ISTA) and Betoptic S (also from Alcon).
  • Alpha-adrenergic agonists - these work by decreasing the rate of aqueous humor production, and can be used in conjunction with other glaucoma eye drops. Examples are Iopidine from Alcon and Alphagan from Allergan.
  • Carbonic anhydrase inhibitors - somewhat similar to alpha-adrenergic agonists, these include Trusopt from Merck and Azopt from Alcon.
  • Combination glaucoma drugs - as it has been found that many glaucoma patients require more than one type of medication to control IOP, combination drops have been developed. These include Cosopt from Merck, Combigan from Allergan and DuoTrav from Alcon.

We can see that Alcon has already developed numerous different types of eye-drops for treating glaucoma. The significance for Simbrinza Suspension is that as Robert Warner of Alcon says, it is the only fixed-dose combination without a beta blocker approved in the US. Simbrinza is a combination of two different drugs in the one bottle (Brinzolamide 1.0% and Brimonidine 0.2%), and patients are required to apply one drop of Simbrinza three times a day. Given Alcon's experience in developing glaucoma eye-drops, and the fact that Simbrinza is now FDA-approved, we know without doubt that this new treatment must be effective. Phase 3 clinical trials were recently conducted with 1,300 patients, with the conclusion that Simbrinza is far more effective than Brinzolamide 1.0% or Brimonidine 0.2% used alone.

Potential Revenue From Simbrinza Suspension

To estimate the revenue that the newly FDA-approved Simbrinza Suspension may generate, it would be reasonable to take a look at how Alcon's existing glaucoma treatments have performed. In the 2012 annual report, it is reported that Alcon had $10.225 billion in revenue for 2012, with their glaucoma pharmaceuticals segment accounting for $1.26 billion in revenue. I expect that in the years to come, Simbrinza Suspension will add hundreds of millions of dollars in revenue to Alcon's bottom line, and thus this is an important development that ought to have a measurable impact on the performance of NVS stock in future.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.