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Bayer  (BAYRY">BAYRY) recently announced that it has filed an application with the European Medicines Agency (EMA) seeking approval to market its blood thinner, Xarelto, in the EU for secondary prevention following an acute coronary syndrome (ACS). ACS refers to a heart disease which results in the blockage of a coronary artery via a blood clot. The disease, which reduces the supply of blood to the heart, is one of the leading causes of death in the US. Bayer has co-developed Xarelto with Johnson & Johnson (JNJ">JNJ).

Bayer is seeking European approval for Xarelto for the indication on the basis of encouraging data from a global late-stage study (ATLAS ACS 2-TIMI 51). Results from the study revealed that there was a significant reduction in cardiovascular events in patients treated with a combination of Xarelto (2.5 mg twice a day) and standard antiplatelet therapy versus those treated only with standard antiplatelet therapy. Moreover, there was a more than 30% reduction in the rate of cardiovascular death and the occurrence of all-cause mortality in the Xarelto arm.

This development comes close on the heels of the European approval of Xarelto for stroke prevention in atrial fibrillation (SPAF) and the treatment of deep vein thrombosis (DVT). While atrial fibrillation refers to a common form of cardiac rhythm disorder, DVT refers to the obstruction of a blood vessel courtesy a blood clot.

Xarelto has been approved for a few indications in the US also this year. In November, the US Food and Drug Administration (FDA) cleared Xarelto for the lucrative SPAF indication. Furthermore, in July, the FDA cleared the drug for the prevention of DVT which may cause pulmonary embolism in patients undergoing knee or hip replacement surgery. Consequently, the European approval of Xarelto for an additional indication - secondary prevention following ACS - would further boost the sales potential of the drug and augment Bayer/Johnson and Johnson’s top line.

Our Recommendation

Currently, we have a long-term Neutral recommendation on Bayer, which is in line with the Zacks #3 Rank (Hold rating) carried by the stock in the short-run. Our stance is similar on Johnson & Johnson.

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