Novartis Shares Downgraded, Leerink Says 'Consensus Still Way Too High'

Leerink’s Seamus Fernandez downgraded the rating for Novartis AG (ADR) NVS from Outperform to Market Perform, while reducing the price target from $98 to $85. The analyst said that the consensus sales expectations for Entresto seemed unrealistic.

Heart Failure [HF] guideline updates, scheduled for later this year, may have a positive impact on Entresto's adoption. Analyst Seamus Fernandez mentioned, however, that the drug's early trajectory, coupled with clinical issues, indicate that the consensus sales estimate of $6B for 2023 are too high.

“Compared to recent large cardiology drug launches in AF, diabetes, and respiratory disease, Entresto is lagging well behind and is a huge disappointment relative to expectations,” Fernandez said.

Key Adoption Barriers

The analyst enumerated the main barriers to Entresto's adoption:

1. Cost, formulary access and prior authorization hurdles
2. Reluctance to switch stable patients to new and unfamiliar therapies
3. Limited data supporting efficacy in unstable/symptomatic patients
4. Higher rate of hypotension than seen in the Ph3
5. Problematic titration

“As we see it, the biggest challenges to clinical adoption are reluctance to switch the group of stable patients as well as titration and hypotension issue,” Fernandez commented.

In the report Leerink noted, “While our DCF-based PT suggests potential upside, our Entresto sales and overall EPS forecasts are well below consensus. Until this corrects, we fail to see how the stock can beat the market or its large pharma peers.”