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BMY + 7%, PFE + 4% p/m, Bayer down
Bayer Shares Slide On Rival Threat To Key Xarelto Drug

By Sten Stovall

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Bristol Myers Squibb Co,Johnson & Johnson,Pfizer IncOf DOW JONES NEWSWIRES

Bayer AG (BAYN.XE) shares slid more than 5% early Thursday after better-than-expected clinical trial data on a rival drug for preventing strokes spooked investors about the prospects of the German group's key medicine Xarelto, but analysts said the reaction was overdone given that both medicines have huge market potential.

The fall was triggered by news Bristol-Myers Squibb Co. (BMY) and Pfizer Inc.'s (PFE) blood thinner Eliquis reached the efficacy goals of a late-stage trial testing it against the standard drug used by patients with irregular heartbeat at risk for a stroke.

The trial tested the drug, also known as apixaban, against standard stroke-prevention treatment warfarin in a pool of patients with atrial fibrillation as well as at least one additional risk factor for stroke.

A spokesman for Bayer HealthCare in Berlin said the German pharmaceutical and chemicals company still expects Xarelto, also known by its chemical name rivaroxaban, to eventually generate peak sales of more than EUR2 billion annually. Use in preventing stroke in patients with atrial fibrillation represents most of that sales potential. In atrial fibrillation, part of the heart doesn't beat correctly and this can lead to blood clots forming, increasing the risk of stroke.

Bayer's spokesman also said the company remains optimistic about Xarelto and expects it to provide an alternative to warfarin.

Still, investors interpreted the news as indicating apixaban may come onto the market sooner than expected, threatening sales projections for Xarelto, which Bayer is co-developing with U.S.-based Johnson & Johnson (JNJ). Bayer shares fell in response and at 1025 GMT were down 5.3% at EUR54.94 in a lower German market.

WestLB analysts reacted with caution to the apixaban trial data: "Given this surprisingly good result, we believe that our Xarelto peak sales estimates in atrial fibrillation might be too high."

Bristol-Myers Squibb and Pfizer plan to submit the experimental drug for regulatory approval in the U.S. in the third quarter and in Europe the following quarter. "The product might enter the U.S. market in the second half of 2012," WestLB said in a note.

Craig Maxwell, managing director of UniCredit's pharmaceuticals research team, said that while the trial data on apixaban was very good, the resulting Bayer selloff wasn't justified.

"We've got to put this good news on apixaban into perspective," he told Dow Jones Newswires. "We're looking at a EUR15 billion market to be eventually created and we expect apixaban and Xarelto to be the two big products in that market."

Boehringer Ingelheim's blood thinner Pradaxa is already on the market, but analysts expect the medicine's potential to be restricted by safety concerns.

"The expectation therefore is that apixaban and Xarelto will be largely battling it out amongst themselves for the bulk of that market," said Maxwell, who expects Xarelto to get U.S. marketing approval by December.

"I expect Xarelto to get a reasonable share of that EUR15 billion market and become a significant blockbuster."

Maxwell, who has a buy recommendation on Bayer, views the German group as the most compelling of European pharma stocks. He said that with Xarelto's prospects, "combined with four other Phase III assets--Alpharadin, VEGF Trap-Eye, riociguat and Lemtrada--due to launch or present pivotal data over the next 12 months, the valuation on Bayer looks highly compelling."

-By Sten Stovall, Dow Jones Newswires; [phone]; [e-mail]