Will recent developments at Novartis (NYSE:NVS) make the stock more appealing to hedge funds?
Entering the third quarter of 2019, enthusiasm for the company’s shares among these investment partnerships as tracked by Insider Monkey declined by nearly 10% from the second quarter. It’s estimated that 3 funds lost interest in the stock altogether in the same period.
Yet, the analyst community is still bullish on Novartis. Twenty-two members of the investment community set a median 12-month price target for the shares at nearly $99, according to a CNN Money article. The high estimate was $108, about 20% over the company’s current price of $85; the low appraisal was just under $81. The stock continues to maintain its Buy rating by 25 analysts.
The company got a big boost this week with FDA approval of a drug that is likely to be a blockbuster, according to an article in FiercePharma. The drug, called Beovu, is a medication to treat wet age-related macular degeneration. The disease causes the deterioration of the macula, which is the small central area of the retina of the eye that controls the sharpness of a person’s vision. It affects abilities such as reading, facial recognition, driving and watching TV.
The condition is expected to affect 1.75 million people in the U.S. next year, hitting the elderly the hardest. Given the growth of the aging population, analysts think sales of the drug will hit more than $1 billion by 2026 and assume the number-one position in its class by 2026.
The competitors that stand to be hit the hardest are Regeneron (NASDAQ:REGN) and Roche (RHHBY). In clinical testing, Beovu demonstrated significant advantages over Regeneron’s Eylea, which should help differentiate it in the market. Sales of Eylea were more than $4 billion in 2018. Meanwhile, Roche has a next-generation wet AMD candidate called Faricimab, but it’s still in phase 3 testing.
Novartis is counting on Beovu to bolster its collection of ophthalmology products, which now includes 70 drugs used to treat a wide range of conditions, according to a FiercePharma article. The franchise definitely could use the shot in the arm as its sales dropped to $4.5 billion in 2018, down 2% from the previous year.
Novartis’ overall strategy is to develop novel treatments like Beovu and build or acquire digital therapeutics that can play a role in the ophthalmic field. For the latter, the company is looking at both partnerships and acquisitions, according to Nikos Tripodis, the head of the company’s Novartis ophthalmology business.
“Digital technologies and diagnostics can play a role in improving eye health, providing solutions from improving clinical trials to training doctors, improving compliance and even creating ‘digital therapeutics’ where the digital solution itself is part of the medicine,” Tripodis said.
In another piece of good news for the company, Novartis reported promising mid-stage clinical trial results for its drug lige-lizum-ab, a treatment for chronic spontaneous urticaria, a debilitating disease characterized by itching and hives that can last 6 weeks or more.
Novartis is hoping the drug can outperform the block-buster bi-o-log-ic Xo-lair, which is facing com-pe-ti-tion af-ter los-ing patent pro-tec-tion, par-tic-u-lar-ly in the Unit-ed States and Eu-rope. Xolair was jointly developed by Novartis and Roche.
Novartis is also going to be working with Microsoft (NASDAQ:MSFT) to find ways to use the latter’s technology to speed every phase of drug development. In addition, the work will focus on personalized treatment for macular degeneration and increasing the efficiency of gene and cell therapies.
Disclosure: The author holds no positions in any of the companies mentioned in this article.
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