Buried in its third-quarter financial announcement, J&J indicated it was dropping two of its pipeline drugs with little or no explanation.
Buried in its third-quarter financial announcement, Johnson & Johnson indicated it was dropping two of its pipeline drugs with little or no explanation.
The company otherwise had plenty of good news. J&J announced sales of $19.7 billion for the quarter, up 10.3 percent compared to the same period last year. Operational sales increased 9.5 percent and domestic sales increased 9.7 percent. International sales grew 10.9 percent. When you exclude acquisitions and divestures, domestic and international sales each grew 3.8 percent.
Deeper into the statement were two sentences: “The Company has made a decision not to pursue global approvals of sirukumab for the treatment of moderately to severely active rheumatoid arthritis. In addition, the clinical trial for talacotuzumab, an investigational compound being studied in patients with acute myeloid leukemia, has been discontinued.”
John Carroll, writing for Endpoints News, said, “The writing was already on the wall months ago for sirukumab, once a top prospect for rheumatoid arthritis until its partners at GlaxoSmithKline suddenly walked out. Earlier this year, though, a panel of outside experts voted down the marketing application, fretting over an unexplained imbalance in deaths in the study. The inevitable formal rejection followed.”
However, J&J dropping talacotuzumab (JNJ-56022473/CSL362) wasn’t expected. There’s no explanation for why the company gave up on it.
Carroll notes that this news is undoubtedly unwelcome, because J&J “has been struggling on the revenue side, leaving some prominent analysts wondering if it can continue to grow pharma sales.”
Joaquin Duato, J&J’s global chairman for pharmaceuticals, said in May that the company planned for its branded drug market to continue with a 5 percent annual growth rate through 2020, despite what executives always refer to as “stiff headwinds” on prices. It expected three drugs to be approved this year and four more next year.
Carroll writes, “These new drugs were part of one leg of the company’s three-leg strategy for growing revenue, with a promise that it can improve significantly on existing drugs—like Stelara, Invokana and Xarelto—while beefing up on a new core focus on pulmonary arterial hypertension through the Actelion buyout.”
J&J also revised its full-year forecast, largely on the basis of strong sales for new cancer drugs. The drugs, specifically Darzalex and Imbruvica, as well as high-margin drugs for rare diseases from its acquisition of Actelion, are expected to be the impetus for future growth.
“We are convinced that the pharma pipeline remains robust and more meaningful contributions will kick in beyond 2017,” Joshua Jennings, an analyst with Cowen & Co. wrote in a note to clients.
Although those areas are going strong, sales of Remicade for rheumatoid arthritis slowed as biosimilars for the drug hit the market.
For its projections for 2017, it increased its profit forecast of $7.12 to $7.22 per share to $7.25 to $7.30 per share. It increased its revenue forecast from $75.8 billion to $76.1 billion to between $76.1 billion and $76.5 billion.
HealthBlogger, with Seeking Alpha, writes, “I believe Johnson & Johnson is one of the best positioned companies in the pharmaceuticals space and worthy of long-term investment. However, I think some profit taking on the name would make sense at this time. In fact, after the strong performance in the last two months and a 19 percent move up year-to-date, a valuation check suggests that the risk/reward is much less compelling than a few months ago.”
