Bryan, Garnier & Co's News

Bayer : Phase III of Riociguat to be presented next Tuesday at CHEST

Fair Value EUR75 (+8%)       BUY
News published on
October Friday 19, 2012

Next Tuesday, investigator is to present data on riociguat for two indications: Pulmonary Arterial Hypertension and Inoperable Chronic Thromboembolic Pulmonary Hypertension. Today we have the abstract for the first indication that reports positive results in phase III vs placebo but does not necessarily guarantee commercial success for the drug despite its new mechanism of action. The bar is high with existing products and they are coming closer to the end of their patent life whereas new options with harder endpoints studied in phase III are also approaching the market.

ANALYSIS
  • The abstract published in the CHEST journal shows positive results for riociguat in Pulmonary Arterial Hypertension (PAH). This preliminary analysis showed an increase in 6-minute walking distance (6MWD) from a baseline of 35.8m for patients under riociguat versus placebo (95% CI 20.1-51.5 m, p<0.0001). In addition, according to the abstract, significant improvements were also observed in PVR (p<0.0001), NT-proBNP (p<0.0001), functional class (p=0.003), clinical worsening (p=0.0046), the living with pulmonary hypertension questionnaire (p=0.002), and the Borg dyspnea score (p=0.002). Results showed good efficacy and safety for the drug but no real difference with drugs that are already on the market in our view if we consider data as reported on prescribing information documents.
  • Riociguat belongs to a new class of drugs (SGc stimulators), which have a different mechanism of action compared to existing PAH agents. Note that the competitive environment in PAH is becoming tougher. The most relevant competition to come is that from generics of Revatio (USD535m, Pfizer, February 2013) and Tracleer (CHF1,522m, Actelion, November 2015 + 6 months). Moreover, Actelion has also reported positive data on macitentan (whose tentative brand name was unveiled yesterday as Opsumit) showing a strong reduction of 45% on a hard primary composite endpoint measuring morbidity/mortality. Opsumit is to be filed in coming weeks, therefore ahead of riociguat. For all these reasons we remain cautious on Bayer’s drug potential in this indication.
  • The CTEPH indication, without competitors, should definitely be easier commercially speaking although it is not always easy to differentiate the two. Today, the current standard of care is surgery although some off-label use with PAH drugs cannot be ruled out even though they have not demonstrated any benefit in this indication. There is an unmet clinical need that Bayer’s compound could address even if we think that it will be harder to show positive data in this indication.
VALUATION
  • Riociguat is factored into our sales model with peak sales in 2020 of EUR860m o/w 60% derived from the CTEPH indication although this remains speculative (no data in the abstract).
  • Riociguat represents around EUR1.5 per share of our FV of EUR75.
NEXT CATALYSTS
  • CHEST congress: CHEST-1 and PATENT-1 presentations on 23 October.
  • Q3 results on 30 October 2012
Analyst : Martial Descoutures / 33(0) 1 56 68 75 18 / mdescoutures@bryangarnier.com
Sector Team : Mathieu Chabert, Eric Le Berrigaud, Sébastien Malafosse