Highlights include Sanofi-Aventis SA (SNY) and Johnson & Johnson (JNJ).

On March 18th and 19th, the FDA advisory panels recommended approval of 2 important cardiovascular product candidates. The FDA does not have to follow the recommendations of the panels but usually does.

On Wednesday, the 18th of March, an FDA advisory panel recommended approval of Sanofi-Aventis’ (SNY) heart drug Multaq. Multaq (dronedarone) is a new class III anti-arrhythmic drug developed for atrial fibrillation (AF).

On Thursday the 19th, an FDA review panel voted 15 to 2 in favor of approving Johnson & Johnson’s (JNJ) anticoagulant rivaroxaban. Rivaroxaban, which will be sold under the brand name Xarelto upon approval, will be marketed in the U.S. by J&J and is already sold partner Bayer AG outside of the U.S. Multaq was initially submitted to the FDA for approval in 2006 but the FDA responded with a “not-approvable” letter.

Sanofi continued with development and presented results of the phase III ATHENA trial in May 2008 at the World Congress of Cardiology conference. Results showed that Multaq met its endpoint by significantly reducing the risk of cardiovascular hospitalizations or death from any cause by 24% compared to placebo.

Multaq also significantly reduced the risk of arrhythmic death by 45% and the risk of cardiovascular death by 30% on top of standard therapy compared to placebo. It failed, however, to show a statistically significant benefit in reducing death from any cause, a secondary endpoint.

A retrospective analysis of ATHENA discovered that Multaq also significantly reduced the risk of stroke by 34% in AF patients already being treated with standard therapy including anti-thrombotics. The FDA advisory panel clearly believed that the data was compelling enough to warrant recommending Multaq for approval.

The advisory panel recommendation means that FDA approval is very likely, which is very good news for Sanofi, as we believe Multaq could post sales of EUR400 million by 2012 and eventually achieve blockbuster sales status. We have viewed Multaq as Sanofi’s most promising late-stage pipeline compound.

Sanofi, like many large-cap pharmaceutical companies, will be contending with significant patent expirations over the next few years and needs to rely on new products such as Multaq to replenish its coffers.

Patent expirations of Taxotere (cancer), Plavix (anti-clotting) and Avapro (hypertension) will contribute to significantly slower companywide revenue growth at Sanofi over the next few years. We estimate almost EUR8 billion of Sanofi’s sales will be exposed to patent cliffs through 2012, representing about 26% of the company’s expected revenue in 2009.

Meanwhile, rivaroxaban, a factor Xa inhibitor for anti-coagulation, is J&J’s most promising late-stage pipeline candidate, in our opinion. The FDA panel recommended approval for the prevention of blood-clots in the legs of patients undergoing hip or knee replacement surgery.

Phase III data showed rivaroxaban significantly reduced the incidence of blood clots compared to Sanofi-Aventis’ blockbuster drug Lovenox. Major bleeding was numerically higher in rivaroxaban patients but not statistically significant. Despite the bleeding concerns, as well as concerns over liver toxicity levels in patients given rivaroxaban, the FDA panel recommended approval. We expect the FDA to make a decision by the end of May.

Upon FDA approval we believe the strong efficacy data will allow rivaroxaban to gain significant market share from Lovenox, which posted sales of EUR2.7 billion ($3.8 billion) in 2008. Rivaroxaban, which is given orally in pill form, should also benefit from ease of administration versus Lovenox which must be injected.

Rivaroxaban is also being studied for the prevention of acute coronary syndrome (ACS), a potentially very lucrative indication. Eventual FDA approval for this indication could push peak sales of rivaroxaban to $2 billion or more.

Gaining final approval for both Multaq and Xarelto will be two important events for big pharma investors to keep an eye on. The FDA has been a significant wildcard in drug company investing over the past several years. With new leadership in charge, investors are clearly hoping for a change.

If the FDA follows the advice of the panel on both Multaq and Xarelto it could provide some confidence and much needed consistency in FDA decisions that would certainly fare well for all big pharmaceutical companies in the future.

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Read the full analyst report on “JNJ”
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