MKGAF Merck KGAA (PK)

Sanofi’s (SNY) subsidiary, Genzyme, recently announced that the US Food and Drug Administration (FDA) has issued a refuse-to-file letter in relation to its marketing application for Lemtrada (alemtuzumab). In June 2012, the company had submitted a supplemental Biologics License Application (sBLA) to the FDA for Lemtrada for the treatment of relapsing multiple sclerosis (RMS).

The FDA has not asked for any additional studies but Sanofi will have to rework on the presentation of the data. Sanofi plans to work along with the FDA and resubmit the marketing application as early as possible.

A marketing application for Lemtrada for RMS was also filed with the European Medicines Agency (EMA), which has been accepted and is under regulatory review.

Lemtrada demonstrated efficacy and safety in two phase III trials, which were completed in 2011. In the first study, CARE-MS I, Lemtrada met the first primary endpoint. Results showed that treatment with two annual cycles of Lemtrada resulted in a 55% reduction in relapse rate compared to Pfizer/Merck KGaA’s (PFE/MKGAF) Rebif over the two-year span of the study. However, Lemtrada failed to achieve statistical significance for the second primary endpoint. Results showed that 8% of patients treated with Lemtrada had a sustained increase in their Expanded Disability Status Scale (EDSS) score (or worsening) compared to 11% of the patients on Rebif.

In the second study, CARE-MS II, Lemtrada met both the primary endpoints. Results showed that treatment with Lemtrada resulted in a 49% reduction in relapse rate compared to Rebif, over a two-year period. Additionally, Lemtrada showed a 42% reduction in the risk of sustained accumulation (worsening) of disability.

Lemtrada is being developed in collaboration with Bayer HealthCare (BAYRY).

Sanofi’s pipeline also includes Aubagio (teriflunomide), another RMS drug. Aubagio is under regulatory review in both the US and the EU. Key players in the multiple sclerosis market include Biogen (BIIB) and Novartis (NVS) among others.

Our Recommendation

We are pleased with the company’s efforts to develop its pipeline. We expect Sanofi to continue to contain operating costs in order to increase earnings in the face of weakening sales of some of its biggest products. We also expect the company to pursue bolt-on acquisitions.

We currently have a Neutral recommendation on Sanofi. The stock carries a Zacks #3 Rank (Hold rating) in the short run.
 

 
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