Novartis: Good News From the Pipeline

Includes: MKGAY, NVS, SNY
by: EP Vantage

There will no doubt be a round of congratulatory back slapping going on in Novartis’ (NYSE:NVS) offices today following the news that the FDA has granted marketing approval for the group’s second biggest pipeline product, Menveo, a vaccine for meningitis. However, the fact that shares in the Swiss company have barely moved today indicates that this feat was considered a shoo-in by investors.

Although there is already competition in the market in the form of Sanofi-Aventis’ (NYSE:SNY) Menactra and Menomune, the introduction of another quadrivalent vaccine that protects against four of the most common strains of meningitis in 11-55 year olds is expected to help to grow sales in this space rather than claw market share from the other incumbents, something that Novartis investors must be pleased about. Estimates from EvaluatePharma show that the market for meningitis treatments is forecast to grow by 19% to $2.88bn by 2014.

What will also help to push sales will be Menveo’s approval in Europe for the same age group, which given that the group received a positive opinion in December could come by the third quarter and will help the drug achieve the $538m of sales that have been forecast for it by 2014.

Baby steps

However, as previously stated by EP Vantage, what will ultimately determine the success of Menveo is not the adult and adolescents, but how it fares in the baby and toddler market, where there is an acute need for an effective treatment (Event - Menveo PDUFA important for Novartis' assult on meningitis vaccines, February 18, 2010). At present there is no approved vaccine for babies under 12 months, a population where deaths from the bacterial infection run at 6-10%.

But the race is on for this population. Sanofi’s Menactra, which is approved for patients as young as 2, is seeking approval in 9-12 month babies and is expected to file an sNDA by the second quarter. Novartis is, however, playing catch-up and is testing its vaccine in children aged 2 months to 10 years, with a filing forecast for 2011.

Moving on

As well as adding to Novartis’ sales what the approval of Menveo might do is reassure investors that the group will be equally successful in getting its most valuable pipeline product, MenB, a treatment for the trickiest meningitis sub-type, meningoccus B, through the regulatory process. At present there is no approved vaccine for this subtype, except the group’s MenZB which has been specifically developed for a particular strain in New Zealand.

Phase III trials have started in Europe and the group is in discussions with the FDA to begin pivotal trials in the US. If it is eventually approved sales forecasts for the drug are currently running at $934m by 2014 and many believe it has the potential to be a multi-billion-dollar selling vaccine.

Further catalysts

As well as announcing the positive news on approval for MenVeo, Novartis also revealed today that its oral MS treatment FTY720, now called Gilenia, had been granted fast track designation by the FDA, a move that will allow it to pull clear of Merck KGaA’s (OTCPK:MKGAY) product in the race to get the first oral treatment for this huge disease area. It could also see 2012 forecasts for the drug, which have fallen over the last six months by $238m to $176m start to rise again.

Novartis already appeared to be winning the race after Merck’s Movectro got a refusal to file letter from the FDA in December (Merck’s second stumble causes targets to fall, December 1, 2010).

But even with fast track status in the bag, Gilenia is not guaranteed to get to the market that much faster. Facing up to the realities of US drug approval the Swiss group admitted today that given the drug is a new chemical entity the FDA will almost certainly want to hold an advisory committee for the drug, meaning that the potential PDUFA date in June is likely to be delayed.

But even if this happens, with these two pieces of news Novartis has shown that it has one of the best performing late stage pipelines in the industry.