Novartis AG's (NVS) respiratory drugs franchise could turn into a multi-billion dollar venture soon if the Swiss drug giant can convince U.S. regulators to approve one its pulmonary drugs and pave the way for more approvals from its promising lung drug portfolio.

Approvals in this class could also help the Swiss pharma giant ease the expected sales drop that will hit the firm over the next two years as the company's blockbuster heart drug Diovan and cancer medicine Femara lose patent protection.

An advisory panel of the Food and Drug Administration will meet next Monday to discuss lung drug Indacaterol for treating chronic obstructive pulmonary disease.

A positive panel verdict would lift approval chances.

More importantly, it would allow for an early launch of other pulmonary drugs which hold huge sales potential.

"Indacaterol is the key building block for Novartis' respiratory franchise," said JP Morgan Cazenove analyst Alexandra Hauber.

An early Indacaterol launch could open the way for the approval of experimental drug QVA149, which combines Indacaterol with another drug and which has potential peak sales of $5 billion.

Nomura analyst Amit Roy shares this view. "Approval of [Indacaterol] is an important stepping stone in Novartis' ambitions to launch a respiratory platform based on both single and combination therapies."

While sales potential for Indacaterol is below the $1 billion blockbuster threshold, QVA149 and experimental lung drug QMF149 look set to meet or surpass this level.

While Novartis has filed Indacaterol for approval at doses of 75 micrograms and 150 micrograms, there are concerns regulators might only opt for the lower dose or ask for more tests, which could prolong the approval time and disrupt Novartis's product rollout.

Indacaterol is already approved in Europe. But safety concerns have kept the U.S. regulator from a quick approval. The FDA has asked Novartis for data about the safety and efficacy of the drug at a lower dose.

"Concerns about the dose could have implications for the QVA149 and QMF149 trials, which use the higher dose and bear the risk of delays," said Fabian Wenner, analyst at UBS.

If Indacaterol does win approval at both suggested doses, then Wenner expects filings for QVA149 in 2012 and QMF149 sometime in 2014.

2015 consensus estimates for the entire franchise currently stand at about $1.2 billion. UBS has a lower estimate of $860 million, and sees peak sales potential of $2.5 billion, provided everything runs to plan.

-By Goran Mijuk, Dow Jones Newswires, +41 43 443 80 47; goran.mijuk@dowjones.com
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