Novartis' LCZ696 kindles megablockbuster projections with impressive PhIII heart data

Novartis ($NVS) told the world back in March that its experimental heart drug LCZ696 had delivered the goods early in a pivotal study, allowing for a quick wrap of the Phase III trial. And today the pharma giant painted in the numbers, completing the late-stage picture for a closely watched therapy that has the potential to rival the most successful drug franchises now on the market.

The key figure analysts were waiting for was the reduction in the risk of cardiovascular death compared to the standard ACE inhibitor enalapril, which came in at 20%--towards the high end of the range for some of the estimates making the rounds in recent weeks. There was also a 21% drop in the risk of hospitalization, helping Novartis lay out its case for cost effectiveness as it sets up a campaign for global regulatory approvals.

Novartis, which has been streamlining its R&D organization over the past year, was in no mood to downplay the potential impact.

"By demonstrating a very significant reduction in cardiovascular deaths while improving quality of life, Novartis' new heart failure medicine, LCZ696, represents one of the most important cardiology advances of the last decade," said David Epstein, the division head of Novartis Pharmaceuticals.

Designed to be taken twice a day by a massive group of patients suffering from chronic heart failure, the treatment is a dual-acting angiotensin receptor-neprilysin inhibitor, taking a one-two punch with valsartan and AHU-377. AHU-377 blocks a mechanism of action that threatens two peptides responsible for lowering blood pressure while valsartan improves vasodilation, spurring the body to excrete sodium and water. Equally significant for a heart drug, which will have to clear a very high safety bar, LCZ696 even appeared somewhat safer than the generic.

The successful treatment came out of left field, surprising some longtime observers as Novartis struggled to explain the disappointment of another heart drug--serelaxin--and its failure to impress regulators.

That unexpected success may well pay off big time for Novartis. In drug development, most mid-stage successes draw in a host of rival programs. But Bernstein's Tim Anderson notes that LCZ696 looks like it's out front with no one else to worry about for some years, giving Novartis the chance to deliver a blockbuster market that could shoot to $8 billion a year in peak sales. And the analyst expects the drug to hit $2.2 billion in sales in 2020, about 5 years after it gains a prospective approval in the U.S.

Based on all the hubbub over the long weekend, Leerink's Seamus Fernandez doubled his sales projections on the drug, from $3.2 billion to $6.4 billion.

Not all the analysts are equally generous on the peak sales side. Other estimates have ranged from a few billion a year to $6 billion at Deutsche Bank, with everyone focused on that key number for risk reduction.

Heart experts polled by Cowen came up with a bet on a 23% reduction in the risk of cardio death for the patients in the study. And at Deutsche Bank a poll of cardiologists concluded that 15% or better would be "highly relevant," according to a report from Reuters, with a number north of 20% expanding the potential patient pool for Novartis. Analysts at Leerink said back in April that the number had to be more than 20% to hit the p value laid out in the study, which should be good enough to win a market worth billions of dollars in annual sales. And Reuters noted earlier that Morgan Stanley has taken the bear position with a risk reduction of about 30% needed to persuade physicians to widely prescribe a drug likely to cost around $2,000 to $2,500 a year.

In this case, no matter who is right, Novartis appears to be moving in the right direction on a blockbuster drug approval with high odds for success.

- here's the release

Special Report: The top 15 late-stage blockbusters in the pipeline - LCZ696