Last month, Novartis (NVS 2.27%) revealed encouraging results from a phase 3 clinical trial of the rare-disease drug candidate known as iptacopan for adult patients diagnosed with a blood disorder known as paroxysmal nocturnal hemoglobinuria (PNH).
What could these results mean for PNH patients and Novartis' future? Let's dig into the data from the clinical trial and the global PNH market to get an answer.
A potentially life-changing treatment
PNH is a rare and serious blood disorder that's estimated to impact 10 to 20 people per million around the world. The disease causes red blood cells (RBCs) to break apart, which can lead to symptoms such as muscle spasms, fatigue, shortness of breath, and unintentional weight loss.
As with any medical condition, the severity of PNH can vary greatly. Worst-case scenarios can include potentially fatal blood clots. This is why it's of utmost importance to treat the condition as soon as possible to achieve the best health outcome.
The most common treatment for PNH is a drug class called anti-C5 antibodies, such as AstraZeneca's (AZN 1.03%) Soliris and Ultomiris. These treatments have provided outcomes that are leaps and bounds better than prior treatments. But even then, more than half of patients on these drugs still experience residual anemia (that is, low RBC count) and depend on blood transfusions as part of their treatment.
That's how iptacopan could prove to be the next step forward for patients who aren't achieving optimal results on anti-C5 antibodies. Novartis' iptacopan helped 96.8% (60 out of 62) of patients to remain blood-transfusion-free after six months of treatment. This was far higher than the 40% of patients on anti-C5 therapies (14 out of 35) who didn't have to receive transfusions in six months of treatment.
And iptacopan's safety profile was just as solid as anti-C5 antibodies; no patients discontinued iptacopan or anti-C5 antibody therapies because of adverse events during the clinical trial.
Image source: Getty Images.
Needle-moving sales potential
Iptacopan could drastically change the prognosis for many PNH patients. As more therapies like iptacopan eventually come to market, market research company ReportLinker anticipates that the global PNH treatment market will grow from $3 billion in 2020 to $5.7 billion by 2027. And medications will account for $3.8 billion of the sales by that time.
Anti-C5 therapies have embedded themselves as the first-line treatment. But since iptacopan's efficacy could displace anti-C5 therapies, I believe that the drug could seize 30% of the $3.8 billion market. This would be an annual sales boost of $1.1 billion for Novartis.
Stacked up against the $52.2 billion in total sales that analysts expect from the company in 2023, this is a nice enough sales lift by itself. And with other rare-disease indications in clinical trials among a total of 149 projects in its pipeline, Novartis expects that the drug could generate peak sales of $3 billion annually.
A wonderful business that's currently on sale
Novartis is a fundamentally strong pharmaceutical company. Analysts believe that the company will deliver annual earnings growth of 4.2% over the next five years, which could be on the low end considering its deep drug pipeline.
Yet, the stock's forward price-to-earnings ratio of 14.2 is slightly below the drug manufacturer industry's average of 15. For a world-class business like Novartis, I believe that any discount compared to peers is a buying opportunity.
