Good News for Bayer/JNJ

Encouraging news flowed in at Bayer (BAYRY - Analyst Report) from Japan when the regulatory authorities of the country cleared the company’s potential blockbuster blood thinner Xarelto for stroke prevention in patients with non-valvular atrial fibrillation (SPAF).

Atrial fibrillation is the most common form of cardiac rhythm disorder. The blood thinner is already approved in the US (November 2011) and the EU (December 2011) for the SPAF indication.

Bayer’s healthcare division has co-developed Xarelto with Janssen Research and Development, a unit of Johnson & Johnson (JNJ - Analyst Report). Per the agreement, while Johnson & Johnson is responsible for marketing the drug in the US, Bayer is exclusively responsible for the same in countries outside the US.

The approval of Xarelto for the lucrative SPAF indication by the Japanese ministry of health, labor and welfare was based on data from the ROCKET AF and the J-ROCKET AF studies. Both studies evaluated Xarelto versus warfarin (the standard of care) in AF patients who stood the risk of being affected by stroke.

The SPAF indication represents significant commercial potential. The approval of Xarelto for the lucrative SPAF indication in Japan will further boost the sales potential of the drug.

Apart from SPAF, Xarelto is also approved for the treatment of deep vein thrombosis (DVT) in the EU (December 2011). DVT refers to the obstruction of a blood vessel, courtesy a blood clot. Furthermore, in July 2011, the US Food and Drug Administration (FDA) cleared Xarelto for the prevention of DVT, which may cause pulmonary embolism in patients undergoing knee or hip replacement surgery.

Our Recommendation

Currently, we have a long-term Neutral recommendation on Bayer. The stock carries a Zacks #4 Rank (Sell rating) in the short run. We have a similar stance on Johnson & Johnson.

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