We have upgraded our recommendation on
Bayer
(
BAYRY
) from Underperform to Neutral. Our target price on the stock is
$61.00.
The US approval of blood thinner Xarelto for the highly
lucrative atrial fibrillation (
AF
) indication in November 2011 is a huge positive for Bayer. We
expect the product to perform well in the AF indication which is
the most common form of cardiac rhythm disorder. Xarelto, which has
blockbuster potential, has been co-developed with
Johnson & Johnson
(
JNJ
).
Strong sales of Xarelto, also approved in the US for the
prevention of deep vein thrombosis (DVT) which may cause pulmonary
embolism in patients undergoing knee or hip replacement surgery,
should boost the top line significantly. The recent approval of the
blood thinner for AF and DVT in the European Union (
EU
) should further strengthen the top line.
We are also impressed by Bayer's focus on emerging markets as
they offer significant commercial potential. Emerging markets have
been defined by Bayer as the Asia/Pacific region (excluding Japan,
Australia and New Zealand), Latin America, Eastern Europe, Africa
and the Middle East. Sales in these markets increased Bayer's sales
by over 10% in the first nine months of 2011. Bayer's focus on
these markets should drive growth in the upcoming quarters as
well.
We are also encouraged by the potential of Bayer's late-stage
candidates, alpharadin (prostrate cancer) and regorafenib
(metastatic colorectal cancer). Both candidates have performed well
in late-stage studies.
In September 2011, Bayer presented encouraging data from a
late-stage study (ALSYMPCA), which revealed that treatment with
alpharadin improved overall survival compared to placebo. Bayer
intends to seek marketing approval for the candidate in the US and
Europe in mid-2012 on the basis of data from the study.
In October 2011, Bayer presented encouraging data from a
late-stage study (CORRECT) of regorafenib for metastatic colorectal
cancer. The company is in discussions with the US and European
regulatory authorities regarding the filing of marketing
applications for regorafenib for the indication.
Moreover, Bayer continues to expect year-over-year earnings
growth of 15% in 2011. Given these positive factors and the bright
outlook provided by the company, we upgrade the stock to
Neutral.
BAYER A G -ADR (
BAYRY
): Free Stock Analysis Report
JOHNSON & JOHNS (
JNJ
): Free Stock Analysis Report
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