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NVS Leapfrogs MRK with Galvus Submission in EU

http://online.wsj.com

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By Hans Schoemaker
Dow Jones Newswires;

ZURICH (Dow Jones)--Novartis AG (NVS) Thursday said it has filed its diabetes drug Galvus for approval in the European Union, a move that comes earlier than analysts had expected and puts it a step ahead of the competition.

The Basel, Switzerland-based pharmaceutical, one of the largest in the world, said that it has filed its DPP-IV inhibitor for the treatment of type 2 diabetes with the European Committee for Medicinal Products for Human Use, part of the European Medicines Agency, in an apparent tit-for-tat with Merck & Co (MRK), which has a similar drug, Januvia, in the regulatory stream.

Galvus and Januvia, if approved, could be the first in a new class of oral treatments for type 2 diabetes, an increasingly widespread condition linked to obesity. They both belong to a class of drugs called DPP-IV inhibitors, and work by enhancing the body's ability to lower blood sugar levels.

About 195 million people worldwide have diabetes, a disease characterized by high blood sugar levels that result from the body's inability to produce or use insulin.

"The E.U. filing of Galvus comes earlier than we had expected," says Karl Heinz Koch, an analyst at Lombard Odier Darier Hentsch. "Importantly, it is ahead of competing Merck's Januvia, which in a surprise move was submitted in the U.S. roughly one month ahead of Galvus (in the U.S.)."

Novartis had indicated to the market that it would file Galvus in the E.U. before the end of the year, leaving analysts to expect it to be submitted in the fourth quarter. The early filing is positive, WestLB analyst Andreas Burckhardt wrote in a note to investors. "Galvus is an important drug, helping Novartis to keep pharma sales growth in line with sector growth," he said.

Analysts' peak sales estimates for Galvus are from $1 billion to $2 billion a year, meaning it's expected to be a so-called 'blockbuster,' a drug for which sales exceed $1 billion.

With two similar DPP-IV inhibitor drugs filed with the regulators, comparisons are unavoidable.

"Given the clinical data released so far on Glavus and Januvia, we believe both drugs have a very similar profile," WestLB's Burckhardt said.

For Lombard Odier, the scale tips Novartis' way. "In our view Galvus has a superior clinical profile compared to Januvia and its database is substantially more mature," Karl Heinz Koch said, meaning substantially more clinical data is available. Koch rates the stock a buy. "Although some uncertainty remains regarding the timing of the important fixed Galvus-metformin combination Galvus should be able to develop the leading market share in this promising new drug class," Koch added.

Metformin is the generic first-line treatment for type 2 diabetes, and the most widely prescribed. Being able to market the first fixed-combination drug with metformin is seen as an important goal. A fixed-combination drug is one containing fixed amounts of two or more ingredients. Merck expects to hear from the U.S. Food and Drug Administration sometime in October, while Novartis' Galvus is likely to be approved for sale by early 2007.
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