Novartis AG, Merck KGaA, Biogen Idec, Teva and Bed Bath & Beyond

CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Novartis AG (NYSE: [ NVS ]), Merck KGaA (NYSE: [ MRK ]), Biogen Idec (Nasdaq: [ BIIB ]), Teva (Nasdaq: [ TEVA ]) and Bed Bath & Beyond Inc. (Nasdaq: [ BBBY ]).

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Here are highlights from Thursdaya�s Analyst Blog:

FDA Approves Oral MS Drug

Novartis AG (NYSE: [ NVS ]) received a huge boost recently with the US Food and Drug Administration (FDA) approving its oral multiple sclerosis (MS) drug, Gilenya. Gilenya is the first oral treatment to gain US approval for the first-line treatment of relapsing forms of MS. The drug is shown to significantly reduce relapse rates and delay disability progression.

The FDA approved Novartisa� drug along with a Risk Evaluation and Mitigation Strategy (REMS) which will inform patients and physicians on the safe use and risks associated with the drug.

The FDA has recommended that patients should be monitored for a decrease in heart rate on starting treatment with Gilenya. The drug has also been seen to increase the risk of infections. The agency also recommended ophthalmologic evaluation as instances of serious eye problems were observed in patients taking the drug.

The approval of the drug is a significant milestone for Novartis. Earlier this year, an FDA advisory panel had voted unanimously in favor of approving the drug. The panel had unanimously concluded that Gilenya demonstrated safety and effectiveness in treating relapsing remitting MS.

The MS market represents significant commercial potential for Novartis. According to the National Multiple Sclerosis Society, about 400,000 people in the US and 2.1 million people across the world suffer from MS.

Being the first oral treatment to have gained US approval for the treatment of MS, Gilenya should see significant uptake. Gilenya managed to beat other oral treatments like Merck KGaAa�s (NYSE: [ MRK ]) oral formulation of cladribine to the US market. Gilenya is currently under regulatory review in the EU and other countries.

Competition Heats Up for Biogen

Meanwhile, shares of Biogen Idec (Nasdaq: [ BIIB ]), which has two major MS drugs in its portfolio, were down 5.8% on Gilenyaa�s approval. Once launched, Gilenya will be competing primarily with Biogena�s Avonex and Tysabri for a share of the MS market. Results from a study comparing Gilenya with Avonex showed that Gilenya reduced relapse rates by 52% at one year compared with Avonex.

Besides Avonex and Tysabri, Gilenya will be competing with other MS treatments like Tevaa�s (Nasdaq: [ TEVA ]) Copaxone and Merck KGaAa�s Rebif. Being an oral therapy, Novartisa� Gilenya could find quick acceptance as currently available therapies require injection or infusion.

Neutral on Novartis

We currently have a Neutral recommendation on Novartis, which is supported by a Zacks #3 Rank (short-term aHolda rating). While we are pleased with Gilenyaa�s approval, the product could start facing competition soon from another oral MS therapy if Merck KGaAa�s oral cladribine succeeds in gaining US approval by year-end.

Bed Bath & Beyond Beats

Bed Bath & Beyond Inc. (Nasdaq: [ BBBY ]) reported better-than-expected second-quarter 2010 results on the heels of double-digit growth in sales and higher margins. Earnings rose 35% to 70 cents per share from the year-ago quarter earnings of 52 cents a share and handily surpassed its earnings guidance range of 59 cents to 63 cents per share. Bed Bath & Beyond also outpaced the Zacks Consensus Estimate of 63 cents a share.

The company has reported six consecutive quarters of improving trends thanks to its continuous endeavor to boost productivity and providing customers an excellent shopping experience.

Quarterly Details

Bed Bath & Beyond's top line jumped 11.6% to $2,137 million from $1,915 million in the year-ago quarter. The company has been witnessing increasing trends in comparable-store sales. After falling 0.6% in the second quarter of fiscal 2009, comparable-store sales increased in the subsequent quarters. In the quarter under review, comparable-store sales climbed 7.4%.

Double-digit top-line growth, coupled with a reduction in coupon redemption and inventory acquisition costs, led to a 50 basis-point increase in gross margin to 40.4%. However, this was partially offset by a change in the mix of merchandise sold, which included lower-margin categories. Bed Bath & Beyond's cost containment efforts led to lower selling, general and administrative expenses and advertising expenses, which eventually resulted in operating margin expansion of 230 basis points year over year.

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Novartis AG, Merck KGaA, Biogen Idec, Teva and Bed Bath & Beyond