#7 - Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Tel: (732) 524-0400
Fax: (732) 524-3300
|R&D Budget (pharma only)||$4,591||-10%|
|2009 Top Selling Drugs|
Account for 73% of total pharma sales, down from 75% in 2008.
Last year, I pointed out that Johnson & Johnson’s pharma revenues were pretty top-heavy; around 75% of that money came from eight products. That number’s down to 71% this year (and J&J split one of the reported products in two), but five (!) of those drugs — Topamax, Levaquin, Aciphex, Duragesic and Risperdal — got hit by generic exposure in different markets, contributing to a 1% drop in overall drug revenues. Risperdal in particular got demolished, shedding $1.3 billion in annual revenues. In addition to the generic erosion of those top sellers, Procrit dropped 15% of its revenues last year, after a 9% drop in 2007. The EPO biologic continued to decline because of new labeling and dosing rules, leaving J&J with another hole to fill.
J&J had a year to forget in 2009, and it looks like 2010 is shaping up to be even worse. The company posted the biggest revenue drop of anyone on our list, in both percentage (-8.3%) and pharma-dollar terms ($2.0 billion), helping lead the company to its first drop in sales in 76 years.
The Lowe Down
J&J is, as always, one of those outfits with a hand in just about every part of the pharma market. Small molecules, biologics, diagnostics, medical devices, shampoo — you name it, and they’ll be glad to try to sell you some. And when the market slows in one area, another seems to pick up the slack. That is, until last year, when they posted an almost unheard-of sales decline.
Zooming in on the pharma end of the business, their drug sales haven’t been impressing anyone recently. The big sellers are aging, and some of the other hopefuls haven’t quite arrived yet. This would be what’s driving their various layoffs and rearrangements, no doubt, and from what I hear, people are expecting even more of them.
What to do? They’re sitting on a good pile of cash, it looks like, so I’m sure that something will occur to them. In the meantime, their name isn’t exactly being burnished by the various OTC recalls that have been in the news. This is a company that must be longing for things to get back to the way they were a few years ago — but they sure have some diversified company there, don’t they? —Derek Lowe
The carnage continued in 1Q10, with pharma revenues down 2.5%. Currency fluctuations wreaked havoc with J&J’s figures, causing an extra 2.2% drop in 2009, while helping 1Q10 numbers to the tune of a 3.2% boost. U.S. pharma revenues, which are unaffected by exchange rates, were down 12.1% in 2009 and down 12.7% in 1Q10. At this pace, there’s an outside chance that Lilly could pass J&J in our ranks next year, a prospect I couldn’t conceive of even a year ago.
But that’s what happens when some of your top performers get gutted by generics before new products can replace them.
For example, Risperdal, which lost $1.3 billion in revenues from 2007 to 2008, managed to shed another $1.2 billion in sales from 2008 to 2009. It dropped another 50% in 1Q10, posting $138 million in worldwide revenues. Domestically, it dropped from $118 million in 1Q09 to a mere $5 million in 1Q10.
Topamax managed to beat Risperdal in the lost revenue race, plummeting from $2.7 billion in 2008 to $1.2 billion in 2009. It fell another 75% in 1Q10 to $148 million. On top of that, Procrit’s safety and prescribing issues are modestly shrinking that drug’s sales.
With collapses like that, it would take a massive launch-year to replace them, and we don’t seem to live in an era of massive launches. J&J managed to get several approvals in the past year —Nucynta, Invega Sustenna (a new formulation of the Risperdal followup, but I’ll count it as a new product), Stelara, and Pancreaze — but they’ll take years for them to build up significant sales numbers. The company has done a great job marketing Remicade, which continues to rise by double-digits in a very competitive market.
The upside? The major generic damage is done. The company is still at risk of a Concerta ANDA getting approved, and Levaquin’s patent is up after June 2011, but the latter’s sales were “only” $1.6 billion in 2009, so the drop won’t be as daunting as Risperdal and Topamax.
Target: RespiVert Ltd.
Price: not disclosed
Announced: June 2010
What they said: “The addition of RespiVert’s expert scientific team and discovery platforms for inhaled medicines strengthens our capabilities and further builds our pipeline of novel oral and biologic therapies for serious pulmonary diseases.” —Susan Dillon, Ph.D., global therapeutic area head, Immunology, Centocor R&D
Target: Cougar Biotechnology
Price: $903 million
Announced: June 2009
What they said: “[This acquisition] will strengthen our growing capabilities toward a leadership position in the global oncology market.” —William Hait, head of Ortho Biotech Oncology R&D
The company addressed its annus horribilis in November 2009 by announcing a restructuring plan. The moves, which will include 7,500 layoffs, incurred a one-time charge of $1.2 billion in 4Q09, $750 million of which was severance costs. Nearly $500 million of the costs were charged to the Pharma division, with Consumer accounting for $369 million and Devices and Diagnostics taking on $321 million in charges.
The restructuring is intended to save $1.4 to $1.7 billion annually, but J&J isn’t just trying to slash its way to survival. It’s still making big bets in pharma. In July 2009, J&J paid $1.1 billion for 18% of Elan and a controlling stake in its Alzheimer’s immunotherapy program. Later in the year, the company spent $448 million on 18% of Crucell, as part of a collaboration program on influenza vaccines and other large molecule products. The company has also made several acquisitions in the pharma segment (see Acquisition News).
Consumed by Consumer
Now, when I wrote that 2010 could be worse for J&J, I didn’t mean in terms of drug sales. There should be a bottoming-out for revenues, as its new products start to build market share. No, the bigger problem for J&J is in its Consumer business, and it has Congress very angry and FDA very, very involved.
In January 2010, J&J’s McNeil Consumer Health unit recalled several OTC products due to a weird odor emanating from its pills. This was tied to a chemical in the wood used for pallets that carry packaging materials. The FDA sent the company a warning letter over that issue, along with other “significant” manufacturing violations at the site in Puerto Rico where the products originated.
The next shoe dropped when an April 2010 inspection in Fort Wayne, PA turned up a number of deficiencies and a declaration that processes were “out of control,” leading to a recall of more than 40 products for infants and children and a suspension of the facility. A month later, the FDA announced that it will investigate McNeil’s manufacturing practices throughout its network. This was followed by typically contentious Congressional hearings, the discovery that J&J may have conducted a “secret” recall of an OTC product via a third party, and a big PR black eye for J&J.
But it could get worse. If the back-and-forth with Congress and the FDA draws out and J&J faces an even larger inspection and compliance investigation, I can envision a scenario where its NDAs, sNDAs and BLAs end up on the agency’s back-burner until its resolution. (It sure seems like Genzyme received a lot of approvals and clearances from the FDA in the weeks after its consent decree was finalized, doesn’t it?) Given that J&J received as many Complete Response Letters as NDA/BLA approvals from the FDA in the past 12 months, they need to negotiate this rough patch very carefully.
Return to Top Pharma Report homepage.