Johnson & Johnson shares dropped Tuesday, despite the health care bellwether boosting its third-quarter profit 27 percent. Investors apparently are worried about unexpectedly early competition to the company's longtime top seller.
The maker of Band-Aids, medical devices and prescription drugs beat Wall Street's expectations, maintained its 2016 revenue forecast, raised the lower end of its profit forecast and said it's on track for the approval and launch of 10 new medicines between 2015 and 2020.
But on a conference call after the results were released, analysts peppered J&J executives with questions about how it will prevent Pfizer Inc.'s Inflectra from siphoning off sales of J&J's biologic immune disorder drug Remicade, which has earned J&J tens of billions of dollars since its 1998 launch.
On the eve of J&J's results announcement, Pfizer said Monday it will launch a near-copy of the injected biologic drug, called a biosimilar, in late November in the U.S.
Many analysts didn't expect that competition until 2018 because Pfizer and J&J are still fighting in the courts over whether the U.S. patent protecting Remicade's monopoly is still valid, said Edward Jones analyst Ashtyn Evans. If Pfizer loses that litigation, it could have to pay J&J three times the U.S. profits it makes on Inflectra, she noted.
Investors are "beginning to price in the competition" to Remicade, driving down J&J's price, Evans said.
In midday trading, J&J shares fell $2.36, or 2 percent, to $116.13, as the broader markets rose.
Remicade, for treating rheumatoid arthritis, psoriasis, Crohn's disease and colitis, is one of J&J's most profitable drugs, with sales of $5.34 billion in the first three quarters.
Inflectra will be priced 15 percent less than Remicade's roughly $2,600 monthly list price and is sure to cut into Remicade sales, as biosimlars have already done in Europe and Canada.
J&J executives told the analysts that about 70 percent of patients taking Remicade are doing well and unlikely to change drugs, the company has a strong patient assistance program and it's offering sizeable discounts to insurers.
"I think on top of market share loss you're going to see lower prices" offered on Remicade as many new patients opt for Inflectra due to the lower price, Evans predicted.
The world's biggest maker of health care products on Tuesday reported net income of $4.27 billion, or $1.53 per share, up from $3.36 billion, or $1.20 per share, in 2015's third quarter. Restrained spending and soaring prescription drug sales more than offset a dip in consumer product sales.
Adjusted earnings, which exclude one-time items, amounted to $1.68 per share, 3 cents better than analysts expected.
The New Brunswick, New Jersey-based company posted revenue of $17.82 billion in the quarter, up from $17.1 billion a year ago and above the $17.72 billion analysts expected.
Sales of prescription drugs, J&J's largest business, jumped 9.2 percent to $8.4 billion, led by $1.8 billion for Remicade. Xarelto, for preventing strokes and heart attacks, saw sales jump 15 percent to $529 million in the quarter, while sales of biologic psoriasis drug Stelara soared 33 percent to $814 million and sales of new leukemia and lymphoma treatment Imbruvica nearly doubled to $349 million.
Medical device sales edged up 1.1 percent to $6.16 billion, while sales of consumer health products such as Tylenol and Motrin pain relievers fell 1.6 percent to $3.26 billion.
Johnson & Johnson said it expects full-year adjusted earnings in the range of $6.68 to $6.73 per share, up from its July forecast of $6.63 to $6.73 per share. It affirmed its earlier forecast for revenue of $71.5 billion to $72.2 billion.
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