Drug Pipeline Pulse Check: High Expectations for Novartis

Includes: ACL, CLRB, NVS, SNY
by: Research Recap


A string of promising new drugs and broad treatment range make Novartis an attractive buy for those willing to wait out short-term weakness caused by a pending bid to complete its buyout of Alcon (NYSE:ACL), according to Reuters. Some analysts say the stock has been trading below its potential but others note that share overhang from an Alcon deal could dilute Novartis’ stock.

Morgan Stanley analysts said: “We think the current valuation fails to recognize positive pipeline developments and proactive management action,” when they upgraded the stock to “overweight” earlier this week. (StreetInsider)

Societe Generale analysts noted that the firm’s 2011 core PE of 9 times is broadly in line with the sector and reflects “exaggerated concerns over an arguably steep patent cliff and stock overhang following the planned merger with Alcon. Jefferies and Co. analyst Jeffrey Holford expects Novartis to post flat or higher profits even when some of its main patents expire given the company’s increase of higher-priced specialty products.

The stock pays shareholders a dividend that works out to a 3.4% annual yield and Miller Tabak analyst Les Funtleyder has the drugmaker’s 12-month price target pegged at $58. Novartis’ pipeline drug Gilenia is the first oral pill to combat multiple sclerosis, and if approved this fall, the medicine will give Novartis the upper hand in the $10 billion multiple sclerosis market. (Investors.com)

The median price target for Novartis is now at $66, higher than its current share price of around $50, based on data compiled by Thomson/First Call.


European regulators said they expect shortages of Genzyme’s drug Fabrazyme, a treatment for Fabry disease, to last through the year due to chronic production problems. The regulators added that no new patients should be started on Fabrazyme and patients requiring smaller doses of the drug be migrated to a rival product made by Shire PLC (SHPGY) called Replagal. Shire’s price target was raised by Deutsche Bank to $75 from $73 last week. (StreetInsider)

Genzyme’s price target was lowered by Citigroup analyst Yaron Werber to $64 from $66 but he reiterated his “buy/high risk” rating. (Benzinga) Leerink Swann & Co. downgraded the drug maker from “outperform” to “market perform” with a $55-$59 price valuation, saying that more visibility is needed on value creation opportunities.

Genzyme’s median price target is currently at $60.50, compared with its current stock price of around $54, according to Thomson/First Call.


The biopharmaceutical company is developing therapeutics to treat cancer and hepatitis, and the firm announced positive results in a Phase II trial of NOV-002. In combination with neoadjuvant chemotherapy treatment, the drug treats patients with invasive breast cancer.

According to the American Cancer Society, approximately 192,000 women in the U.S. were expected to be diagnosed with breast cancer in 2009, and approximately 41,000 were expected to die from the disease. (EuroInvestor) In March, Novelos had to stop efforts for a lung cancer treatment after the drug failed a phase III trial. (Boston Business Journal)

Sheena Lee

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