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Bayer’s (BAYRY - Analyst Report) HealthCare segment recently received encouraging news from the US Food and Drug Administration (FDA) as it granted priority review designation to the New Drug Application (NDA) for riociguat.

Bayer is looking to get riociguat approved for the treatment of patients suffering from inoperable chronic thromboembolic pulmonary hypertension (CTEPH) and pulmonary arterial hypertension (PAH). A final decision from the US regulatory body is expected by Oct 2013.

We note that the US regulatory authority generally reviews those drugs on a priority basis which offer major advances in treating diseases having no adequate therapy. Applications for priority review designated drugs are reviewed by the FDA within eight months of submission as against the usual twelve months.

Bayer is also seeking approval of the candidate in the EU for the same indication.

Approval has been sought on the basis of positive results from two global phase III studies - CHEST-1 and PATENT-1. Riociguat was generally well tolerated in patients suffering from PAH and CTEPH in both these studies with no unexpected adverse effects.

We believe riociguat’s approval will strengthen Bayer’s cardiovascular portfolio. Riociguat will face stiff competition in the PAH market on approval. The market already has players like Gilead Sciences Inc. (GILD - Analyst Report).

We note that Bayer suffered a huge setback last month when the company and its partner Johnson & Johnson (JNJ - Analyst Report) received a second complete response letter (CRL) from the US Food and Drug Administration (FDA) for their supplemental New Drug Application (sNDA) for Xarelto (2.5 mg twice daily) for the reduction of the risk of secondary cardiovascular events in patients suffering from acute coronary syndrome (ACS).

Bayer, a large cap pharma company, currently carries a Zacks Rank #4 (Sell). The setback regarding Xarelto is primarily responsible for the bearish rank carried by the company. Meanwhile, other large cap companies such as Allergan Inc. (AGN - Analyst Report) currently look better positioned carrying a Zacks Rank #2 (Buy). Gilead also carries a comparable rank.

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