Zacks_Analysts' Blog : EU Backs Bayer/JNJ's Xarelto - Analyst Blog

Recently Bayer (BAYRY) and partner Johnson & Johnson (JNJ) announced that the European Committee for Medicinal Products for Human Use (CHMP) has recommended their blood-thinner (anticoagulant) Xarelto (rivaroxaban) for approval for two indications.

The CHMP recommended that Xarelto be cleared in the European Union (EU) for treating deep vein thrombosis (DVT) and also for preventing recurrent DVT and pulmonary embolism (PE) after an acute DVT in adults. While DVT refers to a blood clot in a deep vein, PE refers to an obstruction in a blood vessel in the lungs, mostly because of a blood clot. The clot causes the blockage in a coronary artery.

Apart from the above indication, the CHMP also recommended the approval of Xarelto, for preventing stroke and systemic embolism in adults suffering from non-valvular atrial fibrillation (AF). AF refers to a cardiac rhythm disorder characterized by an erratic heartbeat. A final decision from the European Commission (EC) is expected by year-end.

While the positive recommendation by the CHMP regarding Xarelto for the AF indication was made on the basis of data from the ROCKET-AF study, the decision to back the drug for DVT indication was based on the EINSTEIN-DVT and EINSTEIN-Extension studies.

Regarding the US approval, Xarelto was cleared by the US Food and Drug Administration (FDA) 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. Xarelto is under review for the AF indication in the US, with a final decision expected in November 2011.

We believe that Xarelto’s approval for the lucrative 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. A major player in the market is Bristol-Myers/Sanofi-Aventis' (SNY) Plavix. 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.