In mid-August, Novartis (NVS -1.64%) shared positive results from the phase 3 clinical trial of its biosimilar to Regeneron (REGN -0.84%) and Bayer AG's (BAYR.Y 1.65%) Eylea. The Swiss drugmaker's results from the phase 3 clinical trial of its Eylea biosimilar suggest that it could be helpful in treating patients with age-related macular degeneration and diabetic macular edema.
With Novartis just months away from filing for regulatory approval for its biosimilar candidate, what could these results mean for the company financially? Let's take a closer look at the phase 3 clinical trial and Eylea's sales to get an answer.
A viable and cheaper alternative for patients
Age-related macular degeneration (AMD) and diabetic macular edema (DME) are two common conditions that impact the eye. It's estimated that AMD affects over 200 million people around the world and is one of the most common causes of blindness. DME may also impact 21 million people.
AMD harms the macula, which is part of the retina. In earlier stages, there are sometimes no signs or symptoms. But in more advanced cases, patients can lose their ability to drive, read small print, and see faces. In the case of DME, too much sugar can damage the retina or block it completely; this can result in vision loss or blindness.
The good news for these patients is that if diagnosed early enough, there are numerous treatments that can prevent progression of their diseases. Since its first approval in 2011 for AMD, Eylea has helped countless patients diagnosed with these conditions to live higher-quality lives. That explains how the total sales of the therapy, split between Regeneron and Bayer, topped $9.6 billion in 2022.
In even better news for patients and the healthcare system at large, several companies are working toward securing regulatory approval for Eylea biosimilars. Novartis is among these drugmakers. The company's phase 3 clinical trial demonstrated that the drug was about as safe as Eylea, in terms of side effects, at treating patients with AMD and DME.
Novartis' Eylea biosimilar also met its primary endpoint: the average change in best corrected visual acuity score from pre-treatment baseline to week 8. Simply put, the biosimilar was comparably effective at improving the vision of patients with AMD and DME.
Biosimilars are often priced approximately 20% to 30% lower than their reference drugs. That's why Eylea biosimilars from the likes of Novartis and South Korea's Samsung Biologics could save patients and health insurers billions of dollars in the years ahead.
Image source: Getty Images.
Respectable sales potential
Novartis' Eylea biosimilar is about as safe and effective as the reference drug. But what does that mean for the drugmaker?
With several other biosimilars likely to enter the fray, no single biosimilar is going to swipe the bulk of Eylea's patient volume away. This is why we can assume that Novartis' biosimilar manages to capture a modest 7% of Eylea's global patient share -- nearly $700 million worth. Factoring in a 25% discount to the reference drug, this would bring in around $500 million in annual sales for Novartis.
That wouldn't be a huge bump in sales compared to the $54 billion in sales that analysts expect from Novartis in 2023, but it would still manage to move the needle. And with well over 100 other projects in the company's pipeline, incremental sales boosts here and there add up. That's why analysts think earnings will rise by 8.7% annually over the next five years.
The stock could be a buy
Income investors will appreciate the fact that Novartis' current 3.5% dividend yield is more than double the 1.5% yield of the S&P 500 index. And with the dividend payout ratio set to come in at 46% over the next 12 months, they can rest assured that the dividend is sustainable.
Since the stock has rocketed 26% higher over the past 12 months, some observers may think Novartis no longer offers value to investors. But because its starting valuation was so low at the beginning of that period, it still looks like a buy; Novartis' forward price-to-earnings ratio of 13.4 remains slightly below the drug manufacturer industry's average of 13.8. At a share price of $101, the stock is an interesting mix of income and value may make it an irresistible buy for income and value investors alike.
