Guggenheim analyst Seamus Fernandez downgraded Novartis (NVS) to Neutral after the American Society of Retina Specialists sent its members a clinical update regarding risk of severe inflammation with Beovu. This was first brought to investors' attention after Piper Sandler analyst Christopher Raymond said yesterday that he was more positive on competitor Regeneron (REGN) following an ASRS member communication detailing a side effect of Beovu that could lead to vision loss. Meanwhile, Jefferies analyst Biren Amin upgraded Regeneron to Buy, citing the reports showing an elevated rate of vasculitis in patients treated with Beovu compared to Regeneron's Eylea.
VASCULITIS REPORTS TIED TO BEOVU: In an emailed statement to The Fly, a Novartis spokesperson said: "Patient safety is of paramount importance for Novartis. On February 23, 2020, the American Society of Retinal Specialists shared with its membership that since Beovu approval on October 7, 2019, ASRS has received reports of 14 cases of vasculitis, of which 11 were designated by the reporting provider as occlusive retinal vasculitis.
Of note: Novartis' review of this information is ongoing and classification of these ASRS-reported cases by Novartis has not been established but we are aware of recently reported adverse events following treatment with Beovu.
Novartis stands behind the safety and efficacy of Beovu. In addition to our own internal assessment, we have engaged an external safety review committee to further evaluate these post-marketing cases. We will continue to share details as they become available.
An estimated 46,000 injections have been administered in the U.S. as of February 21, 2020. The FDA is aware of our ongoing review and we’re in the process of informing other health authorities. Our clinical development and pharmacovigilance teams are working with healthcare professionals to quickly obtain and evaluate all available information in order to classify these events and identify potential risk factors.
Beovu is contraindicated for patients with active intraocular inflammation. Physicians should follow the guidance in the prescribing information that patients with active inflammation should not be injected with Beovu. The product information leaflet for Beovu in the U.S. states a 4% rate of intraocular inflammation and a 1% rate of retinal artery occlusion."
The issue was first brought to investors' attention on Monday, with Piper Sandler analyst Christopher Raymond saying that he was "incrementally positive" on Regeneron after learning that the ASRS issued a member communication that he believes "meaningfully skews the risk/benefit profile" for Beovu. The analyst pointed out that the note detailed a side effect of Beovu that could lead to vision loss, which could mean that "any doc currently prescribing the drug will likely 'freak out.'" Raymond maintained an Overweight rating and $435 price target on Regeneron shares.
MOVING TO THE SIDELINES ON NOVARTIS: Following the news, Guggenheim analyst Seamus Fernandez downgraded Novartis to Neutral from Buy. Calling Beovu a "critically important 2020 launch product" for Novartis, the analyst noted that Key Opinion Leader doctors with whom he spoke think the severe events reported, together with the experience of higher-than-expected inflammation, will be a major blow to the future of the product. They also expect updates from other societies in the weeks ahead, which will keep the issue front and center. Fernandez cut his Beovu 2020 sales forecast by about 90%, to $360M from about $3.6B.
BUY REGENERON: Meanwhile, Jefferies analyst Biren Amin upgraded Regeneron to Buy from Hold and raised his price target on the shares to $492 from $355 after the reports of an elevated rate of vasculitis in patients treated with Beovu compared to Regeneron's Eylea. Two retina doctors he spoke to expect Beovu use to significantly decrease in the near-term and believe the issue will take some time to resolve. The analyst raised his Eylea estimates to be ahead of consensus by $180M in 2020 and $450M in 2021 and 2022, respectively.
PRICE ACTION: In morning trading, shares of Novartis are fractionally lower to $89.47, after dropping as much as 5% on Monday, while Regeneron's stock has gained about 6% to $450.42, adding to yesterday's gains.
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