For the second time, the FDA has rejected Johnson & Johnson’s (NYSE:JNJ) application to expand the use of Xarelto to prevent heart attacks and strokes in patients who have previously experienced severe chest pain or heart attack (acute coronary syndrome or ACS).  While JNJ’s management has reiterated its confidence in the efficacy of the drug and clinical data, we believe that the chances of the drug getting approval for the condition are bleak now.
Nonetheless, we still think that Pfizer (NYSE:PFE) should be able to get similar approval for Eliquis, considered as the closest competitor of Xarelto. Both of these drugs are anti-coagulants (blood thinners) and currently approved for preventing strokes with indications of abnormal heart rhythms and preventing blood clots in patients with knee or hip replacements.
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Johnson & Johnson: A Lost Opportunity?
Acute coronary syndrome (clotting in coronary arteries) is one of the most prevalent diseases in the world, causing over 1.2 million hospitalizations each year.  Despite many available treatments, heart attacks are still one the leading causes of death globally. Both anti-platelet agents like Aspirin and anti-coagulants (anti-thrombotics) like Warfarin can be used to prevent clotting and heart attacks in ACS patients. But, current standard anti-coagulant drug Warfarin is used mostly in special circumstances due to little efficacy. 
Attracted by the multi-billion dollar opportunity, leading pharma companies, including J&J and Pfizer, have been striving hard to tap the available opportunity through their anti-coagulants Xarelto and Eliquis respectively. They have been pitching their drugs against the current standard anti-coagulant drug Warfarin. However, with the second rejection for ACS indication, JNJ’s plans seem to have hit the roadblock. While the full details of rejection remain unclear for now, what may have worked against Xarelto is that while it reduced the risk of major heart attacks in ACS patients in clinical trials, some patients witnessed serious bleeding.  Bleeding is a major side effect of blood thinning drugs, sometimes even leading to death, and side effects matter as much as the drug’s efficacy in determining a drug’s future.
Further, the ALTAS clinical trial data, which was submitted to the FDA, compared Xarelto with placebos instead of Warfarin.  Xarelto will need more clinical data to prove its efficacy over Warfarin. We think that getting the approval will now be even more difficult for Xarelto and we will adjust our revenue expectations from the drug going forward. Earlier, we were expecting Xarelto to receive conditional approval with some label warning. However, we will be closely watching for further details on what led to the rejection of Xarelto and if there is any ray of hope.
No Concerns For Pfizer For Now
Nonetheless, we don’t see any concern for Eliquis as it has exhibited significant safety over Warfarin and Aspirin (ARISTOTLE and AVERROES trials) in reducing the risk of stroke and dangerous blood clots without major bleeding among all non-Aarfarin drugs, including Xarelto and Pradax.  The drug was recently approved for patients suffering from atrial fibrillation, which is not caused by a heart valve problem, even as Pfizer is looking to add another major condition, venous thromboembolism, for Eliquis.
Last month, Eliquis, when compared with a placebo, managed to significantly reduce blood clots risks in patients suffering from venous thromboembolism or VTE (a blood clot within a vein).  We see these impressive clinical results as a positive sign for approvals. Eliquis will not be able to achieve its full sales potential of $3 billion without its extension for treatment of VTE and ACS.
We are in the process of updating our $75 and $27 price estimates for Johnson & Johnson and Pfizer respectively to reflect the earnings, the reporting structure changes and recent developments.Notes:
- FDA Issues Complete Response Letter for XARELTO® (rivaroxaban) for the Reduction of Cardiovascular Events in Patients with Acute Coronary Syndrome, JNJ, March 4 2013 [↩]
- About Acute Coronary Syndrome, American College of Physicians Foundation [↩]
- Why Xarelto for ACS was doomed to fail, Forbes, March 06 2013 [↩] [↩]
- Rivaroxaban in Patients with a Recent Acute Coronary Syndrome, The New England Journal of Medicine [↩]
- Apixaban for Stroke Prevention in Atrial Fibrillation, Hospital Practice, Oct 2011 [↩]
- Pfizer, Bristol-Myers Blood Thinner Cuts Risk of Clots in Study, Nasdaq, Dec 8 2012 [↩]