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We issued an updated report on Novartis AG (NVS - Free Report) on Sep 19.

Novartis has a strong portfolio of oncology drugs like Afinitor, Exjade, Jakavi, Zykadia, Tasigna, Jadenu and an improved formulation of Exjade. In February 2016, the company received a boost with the FDA approving Afinitor for advanced, progressive, nonfunctional, neuroendocrine tumors of gastrointestinal or lung origin. The drug has also been approved in the EU for the same indication.

The recent approval of Kisqali, for use in combination with an aromatase inhibitor for the first-line treatment of postmenopausal women with hormone receptor positive, human epidermal growth factor receptor-2 negative (HR+/HER2-) advanced or metastatic breast cancer is likely to boost the oncology portfolio further. The drug was also approved in Europe. Meanwhile, the FDA also approved a label expansion of Zykadia to include the first-line treatment of patients with metastatic non-small cell lung cancer.

In a major boost, the FDA recently approved its breakthrough gene transfer treatment, Kymriah suspension for the treatment of patients up to 25 years of age with B-cell precursor acute lymphoblastic leukemia (ALL) that is refractory or in second or later relapse. Kymriah, formerly CTL019, is the first chimeric antigen receptor T cell (CAR-T) therapy approved. The approval is a major boost for Novartis given the potential in the CAR-T therapy space. 

The approval opens up new frontiers in the treatment of cancer by advancing immunocellular therapy for children and young adults with r/r B-cell ALL which comprises approximately 25% of cancer diagnoses among children under 15 years and is the most common childhood cancer in the United States. Meanwhile, Novartis plans to make additional filings for Kymriah in the United Staes and EU this year for Kymriah for the treatment of adult patients with r/r diffuse large B-cell lymphoma. In April, the FDA granted Breakthrough Therapy designation to Kymriah based on data from the JULIET study.

On the other hand, we are pleased with the progress in biosimilars pipeline. The company plans to launch five major oncology and immunology biosimilars between 2017 and 2020. This includes a biosimilar version of Roche Holdings AG’s (RHHBY - Free Report) Rituxan (rituximab), which was approved by the European Commission in June 2017 (marketed as Rixathon). Recently, the FDA accepted its Biologics License Application for a proposed biosimilar version of Rituxan.

In August 2016, Sandoz’s Erelzi, a biosimilar version of Amgen, Inc’s (AMGN - Free Report) blockbuster drug Enbrel gained approval in the United States for five indications. Erelzi was also approved by the European Commission in 2017. In May, the European Medicines Agency also accepted the company’s Marketing Authorization Applications for biosimilar versions of Humira (adalimumab) and Remicade (infliximab) for review.


Novartis’ stock has rallied 21.9% year to date compared with the industry’s 16.6% gain.

Novartis is currently going through a transitional stage. The company’s blockbuster drug, Diovan, is facing stiff generic competition in the United States, EU and Japan. Gleevec lost exclusivity in the United States in February 2016. The company also lost patent protection for the drug in EU in December 2016 leading to generic competition.

The loss of patent protection for these top-selling drugs continue to hurt sales. Hence, Novartis expects the next growth phase to begin in 2018 driven by Cosentyx (in psoriasis, psoriatic arthritis and ankylosing spondylitis indications), Entresto, Kisqali and a deep pipeline with candidates like BAF312, AMG 334, RTH258.

Zacks Rank & Stock to Consider

Novartis currently carries a Zacks Rank #2 (Buy). 

Another  top-ranked stock in health care sector worth considering is Alexion Pharmaceuticals, Inc. (ALXN - Free Report) which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alexion Pharmaceuticals’ earnings per share estimates have moved up from $5.32 to $5.60 for 2017 and from $6.56 to $7.05 for 2018 over the last 60 days. The company delivered positive earnings surprises in the trailing four quarters, with an average beat of 11.12%. The share price of the company has increased 17.4% year to date.

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