#7: Johnson & Johnson
Headcount 114,000
Year Established 1887
Pharma Revenues $22,396 -1%
Total Revenues $61,587 -1%
Net Income $13,334 9%
R&D Budget $4,432 -3%
Top-Selling Drugs in 2010
Drug |
Indication |
$ |
(+/- %) |
Remicade |
rheumatoid arthritis |
$4,610 |
7% |
Procrit/Eprex |
anemia |
$1,934 |
-14% |
Risperdal Consta |
schizophrenia |
$1,500 |
5% |
Levaquin |
infection |
$1,357 |
-12% |
Concerta |
ADHD |
$1,319 |
-1% |
Velcade |
myeloma/lymphoma |
$1,080 |
16% |
Aciphex/Pariet |
acid reflux |
$1,006 |
-8% |
Prezista |
HIV/AIDS |
$857 |
45% |
Duragesic |
chronic pain |
$748 |
-16% |
Topamax |
epilepsy |
$538 |
-53% |
Risperdal |
schizophrenia |
$527 |
-41% |
Account for 69% of total pharma sales, down from 73% in 2009.
PROFILE
In last year’s edition, Johnson & Johnson was our top company . . . in terms of revenue drop from the previous year. Thanks to a spate of patent expirations and the new scrutiny applied to Procrit, J&J shed $2.2 billion in revenues in 2009. The company’s pharma businesss managed to drop only $124 million in revenues in 2010, keeping it squarely locked into our #7 slot. (Which means you can ignore last year’s prediction that Lilly might manage to surpass J&J in this year’s list.)
Having fallen most of the way off of its patent cliff (Levaquin is set to expire mid-2011), J&J is positioned to climb back up with a number of up-and-coming drugs. The company is seeing strong growth from Caelyx (ovarian/breast cancer), Invega (schizophrenia), Stelara (severe plaque psoriasis) and Simponi (anti-TNF for rheumatoid arthritis), and recently received approvals for Zytiga (metastatic prostate cancer) and Edurant (HIV, to be sold in a combo-pill with treatments from Gilead Sciences). Shortly before press time, J&J received its first approval for Xarelto, a stroke drug developed with Bayer. Xarelto received a Complete Response Letter from the FDA in 2009, but was cleared to prevent venous thromboembolism in joint-replacement surgery settings. The companies are hoping to get it appproved for stroke prevention next. Some analysts predict the annual post-warfarin anticoagulant market to be around $20 billion.
Meanwhile, J&J awaits EU approval of telepravir, Vertex’s hepatitis C drug, approved in the U.S. in May 2011. Overall, the company hopes to launch 11 new products and 30 line extensions by 2015.
In addition, J&J reached a settlement with Merck over marketing rights for Remicade and Simponi, which were cast into doubt with Merck’s acquisition of Schering-Plough. Merck will pay $500 million in cash and take a smaller piece of the sales and profit pie for ex-U.S. sales. (See Merck’s profile for more on the settlement.)
Despite the growth prospects for the pharma business, J&J’s medical device segment looks like it’s going to remain the top dog at the company. That segment posted revenues of $24.6 billion in 2010, and in April 2011, J&J put up $21.3 billion to acquire Synthes, a trauma-care-focused device company based in Switzerland that posted $3.7 billion in 2010 sales. It’s the biggest acquisition in J&J’s history, in a high-margin segment of the device field. (The segment could use some help, since J&J is facing a huge lawsuit related to the recall of its dePuy hip-replacement devices.)
Back in the pharma segment, J&J recently closed its protracted acquisition of Dutch-based Crucell (see Acquisition News, below). The purchase allows J&J to move into the vaccine market. Under J&J’s SOP, Crucell will continue to operate as a subsidiary and retain its management.
You Might Recall
However, Johnson & Johnson isn’t in the public eye because of its growing drug portfolio or its medical device mega-acquisitions. It’s the company’s ongoing manufacturing problems, centered on its consumer health unit, that have hamstrung the company and damaged its reputation. Since 2009, J&J has initiated countless recalls of its consumer products, culminating in the shutdown of a major manufacturing site and a consent decree with the FDA.
J&J has also issued several recalls of pharma products. These were almost exclusively due to the presence of TBA, a pesticide used on wood pallets, leaching into packaging and creating a musty odor. In June 2011, the company recalled 16,000 bottles of Risperdal for that reason. The TBA problem has also plagued the consumer brands. A few days before press time, J&J issued a recall notice for 61,000 bottles of 2009-made Tylenol due to the TBA-fueled smell.
A more serious recall occurred in February 2011, when prefilled syringes of Invega Sustenna were recalled due to potential cracks in the glass syringe barrel. That recall covered 70,000 units in the U.S. and four lots overseas.
In March 2011, J&J’s McNeil unit entered a consent decree with the FDA covering facilities in Las Piedras, PR, Fort Washington, PA and Lancaster, PA. J&J closed the Fort Washington site in April 2010 and is still conducting remediation of the quality issues uncovered there. Under the consent decree, J&J will need a compliance certification from an independent expert, as well as FDA approval, to re-open that site. The company will continue operating the other two sites, but will have them inspected by a third party and require FDA clearance for remediation plans. The decree will last at least five years.
J&J’s consumer health sales fell by more than $1.2 billion in 2010, with U.S. sales dropping 19% to $5.5 billion. Recalls of Las Piedras and Fort Washington products accounted for $900 million of the shortfall, according to J&J. The company reported that it’s spending more than $100 million to bring Fort Washington into compliance and make it “state of the art in medicine production,” according to chief executive officer Bill Weldon.
As far as the bottom line goes, one major blockbuster from its new and upcoming drugs will offset the material losses of these consumer health problems. But in the court of public opinion, it remains to be seen whether J&J will be able to restore the brand equity of its most public-facing products: Tylenol, Motrin, Rolaids and more.
In some respects, J&J is in a better position than some of its competitors, having already weathered most of its major patent expirations. In the first quarter of 2011, the pharma unit posted growth of nearly 8%, to $6.1 billion. If it can put its manufacturing woes behind it, and avoid multi-billion-dollar fines or settlements (See Legal News, because there are some doozies), perhaps J&J can have a happy 125th anniversary in 2011. —GYR
LEGAL NEWS
Like many of the rest of the top companies, J&J is also facing a raft of lawsuits with potential billion-dollar ramifications. In May 2011, the company recently set aside an unspecified amount to settle federal cases of improper marketing of Risperdal. A few weeks later, a court in South Carolina fined J&J $327 million in a state case. The company plans to appeal. The feds are also investigating the marketing of Risperdal’s followup, Invega.
In January 2011, the Cordis unit (on the medical device side of the company) lost a patent case for its Cypher stent, and was hit with a $482 million penalty. The company planned to appeal, and the judge responded in March by adding $111 million in prejudgment interest to the initial damages and denying J&N’s post-trial motions on non-infringement, invalidity, and inequitable conduct. Shortly before press time, J&J announced that it was getting out of the drug-eluting stent business, taking a $600 million restructuring charge and citing market dynamics.
J&J has also reserved around $1.2 billion related to its recall of DePuy artificial hips (both to conduct the recall and to settle litigation). In April 2011, the company settled an international bribery investigation (part of which tied into the Iraqi oil-for-food scandal) for $70 million.
The company’s $1.8 billion award in its 2009 lawsuit against Abbott’s drug Humira was reversed in February 2011. J&J has filed for a rehearing. Abbott, meanwhile, is suing J&J for patent infringement over Stelara and Simponi.
ACQUISITION NEWS
Target: Crucell
Price: $2.3 billion for 82% of company not already owned
Announced: Oct. 2010
What they said: “Operational excellence in manufacturing and supply chain has made Crucell an established and reliable supplier of vaccines, in particular to emerging markets. We hope to build on those capabilities, and the expertise and talent of Crucell’s employees to continue making a difference in the lives of people worldwide.‚“
—Paul Stoffels, head of pharmaceutical research, J&J
THE LOWE DOWN
I’ll be completely honest: I gave up months ago trying to keep track of all the OTC product recalls and manufacturing problems that J&J has been through. It’s been like a particularly poorly written soap opera, where the plot twists occur partly by design and partly because the writers just couldn’t be bothered to pay attention to the continuity. But isn’t all this over-the-counter stuff supposed to be one of the company’s strengths?
Admittedly, one of their other strengths — doing deals with other companies — seems to be holding up just fine. You sometimes wonder how many people don’t have some sort of agreement with them. So the prescription side of the company doesn’t look too bad, with a lot of products coming along in a wide range of areas. And even if J&J isn’t the complete owner (or originator) of many of these, they still have a lot of stuff to sell in a lot of markets. And that’s not even counting the shampoo, the bandages, the medical devices and all the rest of it. A huge company where every part of it seems to contribute to the whole: how’d that happen, anyway? —Derek Lowe
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