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Biotech / Medical : analysts and calls -- ML

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From: tom pope	9/21/2005 2:21:06 PM
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NVS Novartis Company Update; R&D Update Increases Confidence in Forecasts Pipeline Update Improves Confidence: Novartis’s R&D update both confirmed several of our expectations for its key Phase III assets LAF237 (DPPIV inhibitor for diabetes) and SPP100 (renin inhibitor for hypertension) and provided increased confidence in our current forecasts. LAF Safety Concerns Addressed: Pivotal data presented on LAF237 addressed several of the key safety concerns surrounding the product that had been raised in the PII study. Specifically, hypertension, edema and cardiovascular abnormalities reported for LAF 237 were not serious and similar in occurrence to that seen with metformin. LAF 237 Forecasts Unchanged: Although the 52-week study did not show noninferiority vs metformin, we note that HbA1c reductions of 1.25% are in the range expected from oral anti-diabetic agents. Therefore, we do not view this as an issue for approval in the US. In addition, Novartis indicated that it expects the primary positioning of the product to be as an add-on to metformin therapy which is consistent with our expectations. Our forecasts, of 2010E sales of $1.3bn, do not assume 1st line monotherapy usage and are, therefore, unchanged. SPP100 Positive Combination Data – Importantly data was presented showing statistically significant additional blood pressure lowering for SPP 100 in combination with a diuretic over the diuretic alone. We view this combination data as important, as it supports our view that the key market opportunity for SPP100 will initially be as an add-on therapy. Maintain Buy: We believe that this data should begin to increase the market’s confidence in the potential in Novartis’s late stage pipeline and help the shares to move towards our CHF68 target price. Graham Parry>>

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