Tekturna Approval Pumps Up Novartis

Investors bet the blood pressure treatment will significantly bolster the drug giant's lineup.
Author:
Publish date:

Shares of

Novartis

(NVS) - Get Report

climbed Tuesday after the Swiss drug giant received U.S. approval for its blood pressure treatment Tekturna.

There are fewer drug markets more crowded than the one for treating hypertension, but the Novartis drug has captured Wall Street's attention because it's the first in a new class called renin inhibitors. Renin is a kidney enzyme linked to the regulation of blood pressure.

The once-a-day pill will be available in U.S. pharmacies this month, and the Food and Drug Administration says it can be prescribed by itself or with other blood-pressure drugs. Tekturna, which was developed with Switzerland's

Speedel

, also is under review by European Union regulators.

If Tekturna does what Novartis hopes, the company will have a diverse and formidable lineup of blood-pressure medications. Diovan, a member of the angiotensin-receptor blocker class, produced $4.22 billion in sales last year. Lotrel, which contributed $1.35 billion to revenue, combines two other classes of drugs -- an ACE inhibitor and a calcium-channel blocker.

In December, the FDA approved Novartis' Exforge, which combines the main ingredients in Diovan and

Pfizer's

(PFE) - Get Report

Norvasc. Exforge won't be available until late September, when the U.S. patent on Norvasc expires.

Shares of Novartis recently were up $3.18, or 5.8%, to $56.73, with trading volume more than double the daily average. The stock jump indicates that investors believe Tekturna can provide substantial sales for Novartis, whose total revenue last year was $37 billion.

Analysts, however, doubt that Tekturna will ever match Diovan. Calling Tekturna "an interesting drug scientifically," Prudential Securities' Tim Anderson says prescriptions will rise slowly because of the crowded hypertension market.

Anderson, who has a buy rating on Novartis, says that given the many other classes of brand-name drugs and generic blood-pressure drugs, existing medications are "well-entrenched" in doctors' prescribing strategies.

"It will take time for Tekturna to penetrate this market," wrote Anderson in a Tuesday research report. He doesn't own shares; his firm doesn't have an investment-banking relationship.

Tekturna did fare better with the FDA than another big revenue prospect for Novartis, the diabetes drug Galvus. Late last month, the FDA

asked for more data and an additional clinical trial for Galvus, knocking back the approval date at least into mid-2008.

The latest FDA ruling "comes as a surprise to us, as we regarded Tekturna of higher risk than Galvus," wrote Michael Leuchten, of UBS Securities, in a Tuesday research note, as he maintained a buy rating.

"Following the Galvus disappointment, people had questioned Novartis' ability to bring new products to market," Leuchten said. "The Tekturna approval should help reverse this." He doesn't own shares; his firm has had a recent investment-banking relationship with Novartis.

Tekturna contains a black box warning -- the FDA's strongest alert -- that women should discontinue the drug immediately when they become pregnant. The drug can cause injury or death to a fetus during the second and third trimesters.

In clinical trials, the most common side effect was diarrhea, and less common side effects included cough and rash.

In rare instances, patients developed an allergic reaction that caused swelling of the face, lips or tongue and difficulty breathing -- a side effect, the FDA says, that has been detected with certain other blood-pressure drugs.

"Many patients require two or more medicines to control their blood pressure," said Dr. James Shannon, global head of development for Novartis' prescription drug business. "As a new treatment approach, Tekturna has the potential to help these patients manage their disease."